Re MY Distributors Pty Ltd v Omaq Pty Ltd and John Ring [1991] FCA 649 (19 December 1991)

FEDERAL COURT OF AUSTRALIA

Re: M.Y. DISTRIBUTORS PTY. LTD.
And: OMAQ PTY. LTD. and JOHN RING
No. V G32 of 1991
FED No. 915
Trade Practices - Companies - Federal Court

COURT

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Olney J.(1)

CATCHWORDS

Trade Practices - claim for damages for contravention of ss.52 and 53 of Trade Practices Act - necessity to prove status of respondent as a corporation as defined - claim against director for aiding, abetting etc. alleged contraventions

Companies - proof of incorporation - use of parol evidence

Federal Court - common law claims pleaded with Trade Practices Act claims - common substratum of facts - jurisdiction to hear common law claims where federal claims must inevitably fail

Trade Practices Act, ss 4(1), 52, 53, 78B, 82, 87

Stock v Coast Securities No. 9 Pty Ltd [1983] HCA 36; 154 CLR 261

Burgundy Royal Investments Pty Ltd v Westpac Banking Corporation 18 FCR 212

Cuevas v Freeman Motors Pty Ltd 8 ALR 321

HEARING

MELBOURNE
19:12:1991

Counsel for the Applicant: Mr P. Searle

Solicitors for the Applicant: David Sonenberg and Associates

The first respondent did not appear.

The second respondent appeared in person.

ORDER

The Court orders that the application be dismissed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

DECISION

The applicant claims damages against the first respondent pursuant to section 82(1) of the Trade Practices Act 1974 (the Act) for conduct said to have been done in contravention of sections 52 and 52 of the Act, and against the second respondent pursuant to sections 82(1), 87(1) and 87(2)(d) for aiding, abetting or procuring or otherwise being a party to the contraventions of the first respondent. In addition, damages are claimed against both respondents for negligence and/or breach of duty and for breach of contract.

2. At the outset it is necessary to say something about the manner in which the proceedings, and finally the trial, were conducted.

3. The application was originally filed on 14 February 1991 by solicitors acting for the applicant. Those solicitors have acted for the applicant throughout the proceedings and at trial the applicant was represented by counsel.

4. On 4 March 1991 a notice of appearance was filed on behalf of both respondents by a firm of solicitors which acted for those parties throughout all of the interlocutory phases of the proceedings but on 15 November 1991 notice of their withdrawal was filed. It appears from an affidavit filed with the notice of withdrawal that the notice had been served on the respondents on 6 November 1991. At the trial the second respondent appeared in person, and on being asked from the bench concerning the representation of the first respondent, he agreed that he was a director of the first respondent but stated specifically that he did not seek to appear for or in any way represent the first respondent.

5. During the interlocutory phase of the proceedings the respondents sought orders for security for costs and for the striking out of the original statement of claim, and on 7 June 1991 (when those orders were refused) directions were given inter alia that the respondents file and serve a defence on or before 21 June 1991 and that each party give discovery by 28 June 1991. On 2 August 1991 further orders were made placing the application in the list of cases to be fixed for hearing but reserving liberty to the respondents to move by 6 September 1991 for further and better discovery or for any other directions if so required.

6. The applicants filed a list of documents on 2 August 1991 and a further and better list on 4 September 1991. The respondents did not file any list of documents nor has any defence been filed. Notice of the listing of the application for hearing was given on 19 September 1991 and, as previously stated, the respondents' solicitors withdrew on 15 November 1991.

7. At the trial, counsel for the applicant was in possession of a document which purported to be a defence and which dealt with the position of both respondents and which had apparently emanated from the respondents' former solicitors although it had never been filed. After being taken through those parts of the document which appeared to relate to his case, the second respondent did not accept my invitation to file it, or so much of it as related to his case. In the result the trial was conducted without any defence being pleaded by either respondent and without any appearance by the first respondent. Counsel for the applicant accepted that the second respondent had made him aware of his defence which in substance was that he denied that the conduct pleaded in the statement of claim was misleading or deceptive or likely to mislead or deceive, or that any representations made were false, and in any event whatever part he took in the events relating to the alleged conduct and representations he did so in his capacity as a director of the first respondent and not in his personal capacity.

8. The applicant claims to be entitled to judgment by default against the first respondent. The default of the respondents in filing a defence entitled the applicant pursuant to Order 11 Rule 23(1) of the Federal Court Rules to move on notice for judgment against them. As no such application was made, there is no basis for the Court to enter judgment by default.

9. Upon the first respondent failing to appear when the proceeding was called on for trial the Court had a number of options open to it pursuant to Order 32 Rule 2(1), one of which was to proceed with the trial generally, which is what occurred.

10. The applicant's entitlement to judgment against the first respondent will be dependant upon one or other of the causes of action pleaded against it being established by the evidence. In this context it must be borne in mind that any admissions made by the second respondent in his personal capacity do not bind the first respondent.
THE STATEMENT OF CLAIM

11. The amended statement of claim is a long document in which a variety of causes of action are pleaded.

12. The applicant pleads the following facts in support of its claims for relief pursuant to the Trade Practices Act:
At all material times the respondents were the sole Australian manufacturers of a product called "Energy Master EM 300" (Energy Master) which were goods of a description which it was in the course of the respondents' business to sell. In or about July 1989 and thereafter until July 1990 the respondents represented to the applicant that (a) Energy Master is a device which monitors and reduces energy

consumption in thermostatically controlled cyclic heating and
cooling equipment and is used in a large variety of commercial,
industrial and other applications.
(b) Energy Master does not change the basic operation of the equipment
nor does it move the temperature outside the existing limits to
which the equipment is set.
(c) Energy Master is manufactured to a high standard of reliability. (d)

Energy Master has a failsafe feature whereby in the event of

malfunction, the equipment is left in the conventional operating mode.

13. It is said that the foregoing representations were made in or about July 1989 by the second respondent to the applicant in a written document entitled "An introduction to energy saving - The Energy Master" (the Energy Master document); and further that they were made at the offices of Curlew Developments Pty Ltd (Curlew) on or about 28 July 1989 to one Damien McIntyre (McIntyre) a director of the applicant.

14. The applicant also alleges that on or about 28 July 1989 and thereafter until July 1990 the second respondent on behalf of the first respondent represented to the applicant that

(e) he would supervise the proper installation of Energy Master units
or alternatively, install same;
(f) he would provide adequate training for the applicant's staff to
become installers of Energy Master units;
(g) he would provide technical support concerning the installation of
Energy Master units beyond the training periods of the applicant's
installers;
(h) the respondents would manufacture Energy Master units to a high

standard; (i) the respondents would give a 3 year guarantee on Energy Master units.

15. The representations identified in (e) to (i) are said to have been made by the second respondent to McIntyre at the offices of Curlew on or about 28 July 1989.

16. Finally, the applicant alleges that in or about July or August 1989 and thereafter until July 1990 the respondents represented to the applicant that approximately 69 companies named in a document headed "Some companies who have saved with Energy Master" (the list of companies) have saved with Energy Master units. The list of companies (referred to by the second respondent as his list of "users") is said to have been given to the applicant by the second respondent in or about July or August 1990.

17. The applicant denies that the 69 companies named in the list of companies were in or about July or August 1989 or at any other time users who had saved with Energy Master, and further pleads that all of the representations referred to in (a) to (i) were false.

18. In respect of the representations pleaded, the applicant says

1. All were made in trade or commerce in connection with the supply
or possible supply by the first respondent to the applicant of
Energy Master units.
2. The first respondent did not have reasonable grounds for making
the representations referred to in (a) to (i).
3. In the premises, the first respondent
(a) has made false representations in trade or commerce in
connection with the supply of goods and services contrary to
section 53 of the Act; and
(b) has, in trade or commerce, engaged in conduct that is
misleading or deceptive or is likely to mislead or deceive
contrary to section 52 of the Act.

19. The facts pleaded in support of the applicant's claim against the first respondent for damages pursuant to section 82(1) of the Act are as follows:

On or about 6 July 1989 by an agreement in writing of that date (the
marketing agreement) the first and second respondents as owners of
Energy Master appointed Curlew as exclusive world-wide seller and
marketer of Energy Master, agreed to manufacture Energy Master to a high
standard and give a 3 year guarantee and assigned all brand names,
business and registered names of Energy Master to Curlew. On a date not
specified, the first and second respondents sold or supplied 255 Energy
Master units to Curlew. By a deed of assignment dated 11 December 1989
(the deed of assignment) Curlew assigned and transferred to the
applicant all its right, title and interest arising in and from the
marketing agreement. The applicant entered into the deed of assignment
in reliance on all of the representations. Between August 1989 and 17
May 1990 the applicant entered into agreements for the purchase of 375
Energy Master units manufactured by the first and second respondents for
a total sum of $210,000. Units were purchased as follows:
i) Between 17 August 1989 and 15 December 1989, 255 units at $600 each
were purchased from Curlew.
ii) Between 15 December 1989 and 29 December 1989, 100 units at $450
each were purchased from the respondents.
iii) Between 7 March 1990 and 24 April 1990, 16 units at $600 each were
purchased from the respondents.
iv) Between 10 and 17 May 1990, 4 units at $600 each were purchased
from Eighthleigh Pty Ltd.

20. On or about 3 August 1990 by letter of that date addressed to the respondents, the applicant rescinded each of the agreements relating to the sales referred to and on or about 27 December 1990, returned 326 Energy Master units to the respondents.

21. The loss or damage pleaded as flowing from the first respondent's alleged contravention of section 52 and/or 53 of the Act is

(a) the purchase price of 375 Energy Master units, $210,000;
(b) loss of profits;
(c) $1395 paid to rectify faulty installations performed by the
respondents;
(d) interest;
(e) costs.

(At the trial the applicant did not pursue the claim for loss of profits and further, counsel agreed that item (a) should be reduced by $29,400 to make allowance for 49 units which were not returned to the respondents. In addition it was conceded that the whole of the claim for $1395 was not recoverable.)

22. The Trade Practices Act claim against the second respondent is pleaded on the basis of assertions that he aided, abetted or procured, or alternatively was directly or indirectly knowingly concerned in, or party to, the contravention of sections 52 and 53 pleaded against the first respondent. By way of particulars it is said that the second respondent as a director of the first respondent made, aided, abetted or procured the representations previously referred to.

23. The first of the common law claims pleaded in the amended statement of claim claims from the respondents the same quantum of damages as is referred to in the Trade Practices Act claims for alleged negligence and/or breach of duty. It is said that on or about 28 July 1989 the applicant made known to the respondent the particular purpose for which the Energy Master units were required namely, for sale of same to consumers, or alternatively, the respondents well knew or ought to have known that they would be sold to consumers and were required to be of merchantable quality. Further, it is said that the respondents knew that in the absence of reasonable care in the manufacture and installation of the units, loss and/or damage would or might result to the applicant and that it was reasonably foreseeable that in the absence of such reasonable care such loss and/or damage would or might result. In the premises the applicant pleads that the respondents owed the applicant a duty

(a) to supervise and ensure the proper installation of the units;
(b) alternatively, to provide proper installation of the units;
(c) to provide adequate training for the applicant's staff to become
installers of the units;
(d) to provide a 3 year product guarantee for the units; and (e) to

manufacture the units to a high standard.

24. It is alleged that in breach of this duty the respondents did not properly install or supervise the installation of the units, and failed to provide, or alternatively failed to provide any adequate, supervision or support service, training of installers, 3 year product guarantee and failed to manufacture Energy Master units to a high standard. Particulars are pleaded in respect of the claimed improper installation or supervision of the installation of units at 6 different locations.

25. The second common law claim is for damages for breach of contract and relates to 116 Energy Master units purchased by the applicant from the respondents between 15 December 1989 and 24 April 1990 for a total sum of $54,600. It is said of the agreements relating to the purchase of these units that it was a term of each, or alternatively, it was implied by law, that

(a) the units were of merchantable quality;
(b) the respondents would supervise and ensure the proper installation
of the units;
(c) alternatively, the respondents would properly install the units;
(d) the respondents would provide adequate training for the
applicant's staff to install the units;
(e) the respondents would provide a 3 year guarantee for the units;
and
(f) the respondents would manufacture the units to a high quality.

26. In support of these terms the applicant pleads by way of particulars the representations (a) to (i) referred to in relation to the Trade Practices Act claims. It is said that the respondents breached each of the terms pleaded, that on or about 3 August 1990 the applicant rescinded the agreements, and on or about 27 December 1990 returned 326 units to the respondents. In the premises the applicant claims to have suffered loss and damage occasioned by the alleged breaches, namely the sum of $54,600, loss of profits, the sum of $1395 referred to in the Trade Practices Act claims, interest and costs. (The claim for loss of profits was nor pursued.)
THE TRADE PRACTICES ACT CLAIMS

27. Section 52 of the Act provides that a corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

28. By section 4(1) of the Act the term corporation is defined to mean a body corporate that:

(a) is a foreign corporation;
(b) is a trading corporation formed within the limits of
Australia or is a financial corporation so formed;
(c) is incorporated in a Territory; or
(d) is the holding company of a body corporate of a kind
referred to in paragraph (a), (b) or (c);

29. In the statement of claim the applicant pleads that the first respondent is and was at all material times a company incorporated in the State of Victoria and that it is and was at all material times a corporation within the meaning of the Act. As neither of these allegations is admitted, it is incumbent upon the applicant to prove the status of the first respondent as a corporation within the meaning of the Act.

30. No evidence was adduced to prove the incorporation of the first respondent in Victoria, or elsewhere. Nor was any evidence given upon which a finding could be made that the first respondent (assuming it to be a body corporate) fell within any one of the four categories of bodies corporate referred to in the definition of corporation.

31. The only evidence which in any way was directed to the corporate status of the first respondent was a portion of an affidavit sworn by the second respondent on 24 April 1991 in which the second respondent swore that he was a director of the first respondent and that he was authorised by the first respondent to swear the affidavit on its behalf. Such an admission may conceivably, in an appropriate context, be some evidence that the first respondent is a body corporate, but it certainly is not evidence sufficient to establish the body corporate as a corporation as defined in the Act.

32. Apart from the foregoing, the only item of evidence in which any reference is made to the first respondent is in the marketing agreement annexed to the deed of assignment. The marketing agreement bears a signature (which is indecipherable) above the words "For and on behalf of Omaq Pty Ltd and John Ring". Neither the first respondent nor the second respondent was a party to the deed of assignment, and no other document produced in the proceedings bears the name of the first respondent. Nor was any evidence given from which any inference can be drawn that the first respondent is engaged in trade or any other specific activity.

33. In my opinion the applicant has not proved that the first respondent is a party to whom section 52 applies.

34. Section 53 of the Act also applies to corporations engaged in trade or commerce. For the same reasons which apply to the applicant's claim under section 52, its claim under section 53 must also fail.

35. Quite apart from the question of whether the applicant is a corporation to which sections 52 and 53 apply, the findings made hereunder in relation to the capacity in which the second respondent dealt with the applicant would exclude the operation of those sections. This aspect of the case is canvassed in detail in the context of the common law claims.

36. Section 75B(1) of the Act provides that a reference to a person involved in a contravention of a provision of, inter alia, Part V should be read as a reference to a person who has aided, abetted, counselled or procured the contravention and who has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention. In this proceeding it is claimed that the second respondent aided, abetted or procured, or was otherwise a party to the contravention of sections 52 and 53 alleged against the first respondent.

37. The failure of the applicant to establish any contravention of either section 52 or 53 by the first respondent necessarily means that there is no basis upon which the second respondent can be rendered liable in respect of any contravention of a provision of Part V.
THE COMMON LAW CLAIMS

38. The remaining claims pleaded against the respondents have no foundation in any cause of action in respect of which the Federal Court of Australia has jurisdiction apart from what is commonly described as the accrued jurisdiction of the Court or by reason of the provisions of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Victoria).

39. The federal claims arising under the Trade Practices Act, and the non-federal claims in contract and tort are pleaded in such a way that there is no doubt that the two classes of claims so depend on common transactions and facts that they arise out of a common substratum of facts (Stack v Coast Securities No. 9 Pty Ltd [1983] HCA 36; 154 CLR 261). The Court has in the circumstances jurisdiction to hear and determine the common law claims even though the federal claims in this case must inevitably fail (Burgundy Royale Investments Pty Ltd and others v Westpac Banking Corporation and others (1988) 18 FCR 212). The Court also has jurisdiction with respect to the common law claims which if taken in isolation from the matters of federal jurisdiction would be State matters within the jurisdiction of the Supreme Court of Victoria. (Jurisdiction of Courts (Cross-Vesting) Act 1987) (Vic) s.4(1)).
THE EVIDENCE

40. At the trial evidence was given by 3 witnesses called by the applicant and a number of documents were tendered as exhibits. The second respondent exercised his right to cross-examine but did not give evidence himself or call any witnesses.

41. Damien Henry McIntyre said that from July 1989 to some time in January or February 1990 he was a director of the applicant. He had been an accountant working in Adelaide when contacted by a Mr Clamp, who he knew, and who also became a director of the applicant. Clamp was interested in a business venture concerning the Energy Master and asked McIntyre if he would become responsible for the sales and administration side of the business, which he agreed to do. His first contact with Energy Master was when Clamp showed him the Energy Master document. McIntyre first met the second respondent in July 1989 at a meeting at the offices of Curlew to which he had been invited by Curlew's managing director, Mr Allatt. All he knew about Energy Master was the information contained in the Energy Master document, and at the meeting he sought more technical information. He said that in the course of the meeting, which lasted about 1/2 to 3/4 hour, the second respondent made the representations referred to in counsel's opening address (as to which the witness gave no particulars) and he was told that he should establish offices and look for an A-Grade electrician to be trained in installing the units. The proposal was that the applicant would purchase units on a weekly or monthly basis from Curlew. On 11 December 1989 the deed of assignment was executed between the applicant and Curlew whereby Curlew assigned its distribution rights to Energy Master to the applicant.

42. During discussions with the second respondent in relation to the installation of Energy Master units, the second respondent said the applicant would require an A-Grade electrician and he (the second respondent) would train the electrician on the modus operandi. The applicant purchased a number of units after the meeting but in the witness's time with the applicant, from less than a dozen trial installations, 4 produced savings in electricity and only one sale was made. (When cross-examined he agreed that in his last week with the applicant another sale was made.) Whilst the witness was with the applicant an electrician by the name of Don Grey was engaged, not as an employee but on the basis of payment for each unit installed. The witness made arrangements with the second respondent to train Grey. Originally the arrangements were made through Curlew but later they were made with the second respondent direct. The question of a three year guarantee for Energy Master units was mentioned in discussions with the second respondent, and the witness did sight the marketing agreement. The second respondent described the list of companies as successful users of Energy Master at the initial meeting and later when asked for a complete list of users he referred to this list.

43. When cross-examined McIntyre said that the purchase of units from Curlew after the execution of the deed of assignment was part of the overall transaction with Curlew, and the applicant agreed to it in order to secure the co-operation of the second respondent who had made it known that he would in future only deal with the applicant if it took the units from Curlew. The witness agreed that the second respondent had not expressly required the applicant to purchase the units from Curlew. The witness also agreed that so far as he knew the two units sold during his period with the applicant, namely units installed at Tobins Funeral Directors and the Keilor Swimming Pool had functioned satisfactorily.

44. In the course of McIntyre's evidence-in-chief an affidavit he had sworn on 17 May 1991 was tendered. No objection was raised, but it is clear that much of its content is inadmissible as evidence and to that extent I will disregard it. The affidavit to a large extent traverses much of the evidence given orally. It does however refer to a meeting with one Max Clements, said to have been described by the second respondent as "my sales guy", and to sales training courses in early August 1989 conducted by Curlew which were taken by Clements and at which the representations previously referred to as having been made by the second respondent were repeated by Clements.

45. Gary John Clamp testified to having been a director and secretary of the applicant since July 1989. He first met the second respondent in about June 1989 at the offices of Curlew when he was introduced to him by Allatt. Curlew was a client of Clamp's accountancy practice. He had first heard of Energy Master through Allatt at about the same time. Allatt gave him the Energy Master document in early July 1989 when Curlew was looking for distributors of Energy Master units in contemplation of taking on the national distributorship of the product. After some brief discussions with Allatt, Clamp had some discussions with McIntyre who was then in Adelaide and upon McIntyre's return to Melbourne he gave him a copy of the Energy Master document. McIntyre was then introduced to Allatt and a meeting was arranged for him to meet the second respondent and Clements at Curlew's office. Clamp was not present at Curlew's office when McIntyre first met the second respondent. The witness first saw the marketing agreement prior to the execution of the deed of assignment. In discussions with the second respondent between July and December 1989 the second respondent always referred to himself as the inventor and owner of Energy Master. The witness was aware that a 3 year guarantee was to be given on all units sold. He said that the applicant agreed to purchase units on the basis of the information supplied. In his evidence he said that an initial purchase of 30 units was made from Curlew at a unit price of $450 but this was clearly inconsistent with other evidence which indicates that the initial purchase was of 20 units at $600 each. (Nothing turns on this inconsistency.) The subsequent purchase of units from Curlew was made pursuant to the deed of assignment. The units original purchased were acquired as part of the distribution arrangement that the applicant had with Curlew. The applicant was to obtain the services of an A-Grade electrician who would be trained by the second respondent to install and program the units. Clamp was unable to recall any discussions with the second respondent concerning the training of a person to install the units. Subsequently 200 odd units were acquired from Curlew as part of the deed of assignment. Advice from the second respondent prior to entering into the deed of assignment was that it would be possible to sell these units. The representation concerning the failsafe feature of Energy Master was contained in the Energy Master document but the witness had no recollection of the second respondent ever mentioning it. After the deed of assignment was executed in early December 1989 the second respondent was keen to make further sales and the applicant purchased 100 units for $45,000. The second respondent undertook to train installers and although the applicant had some difficulty in getting hold of him for this purpose, he was nevertheless available fairly regularly.

46. The applicant experienced a relatively quiet period in January 1990 and after McIntyre left the company in late January or early February 1990 a Mr Grenfell-Hoyle took on the responsibilities for sales and general management. It was in the next 2 to 3 months that difficulties were first experienced with the installation of units. The problems were related to the ability to get hold of the second respondent and his ability to train electricians satisfactorily so they could work independently of him. Problems with units installed at the Corporate Affairs office were rectified and the units were paid for and nothing further was heard from the building owners. The applicant made an initial purchase of 100 units following the deed of assignment. Further units were purchased at the rate of 2 or 3 per week for several months but purchases ceased around April or May 1990. Purchasers were made notwithstanding the large stock on hand in order to ensure the second respondent's co-operation in training installers and his availability to attend to technical problems. The second respondent did make himself available and dealt with technical problems but it became increasingly difficult to contact him as he was extremely busy. The applicant was never sure what he was doing although it was the witness's understanding that the applicant had first call on his services.

47. In discussions with the second respondent concerning the list of companies the witness sought more specific details of the types of installations and the actual sites of the installations but the second respondent refused to give this information saying he did not want the applicant to bother his clients. He said he would take the matter up with the clients and see if they would provide a letter confirming that they were saving with Energy Master. The second respondent referred to the list as his users list from July 1989 onwards.

48. Clamp attempted to contact each company on the list and received a number of written and verbal replies. (The written replies and memoranda relating to verbal replies are exhibited to an affidavit sworn 17 May 1991 which was tendered in evidence but as same are clearly inadmissible as hearsay I do not propose to refer further to them.) After some problems were experienced the applicant engaged a Mr Sullivan, an electrician, who inspected some sites and found some installations to be incorrect but the witness did not know if the second respondent ever had these matters drawn to his attention. In May or June 1990 the applicant withdrew from its arrangement with the respondents and a company called Eighthleigh Pty Ltd assumed the role of national distributor. The applicant purchased 2 units from Eighthleigh. The witness said that the only contract the applicant had was the assignment from Curlew, which was rescinded in writing.

49. The applicant's stock of units was returned to the second respondent in December 1990 after demand was made for a refund of the money paid for them but no reply nor any payment has ever been received. During the period the applicant was in business it was paid for approximately 30 units sold by it.

50. Under cross-examination Clamp said that invoices were received in the name of Omaq Pty Ltd and paid in that name but that the second respondent explained that he was the inventor and manufacturer. The witness had no knowledge to suggest that units installed by the applicant were not functioning other than the information obtained from Mr Sullivan. When pressed, the witness agreed that in the initial period the arrangement concerning the training of installers was made through Curlew which was then the national distributor of the product.

51. In response to questions from the bench, the witness said that the second respondent had advised that the applicant's national distributorship had been cancelled and that Eighthleigh Pty Ltd had been appointed, but that the applicant was to remain as distributor for Victoria and Tasmania. At that stage further units were purchased from Eighthleigh Pty Ltd, notwithstanding the large stock still on hand, as it was still contemplated that a successful business operation could be carried on although that depended upon the second respondent's co-operation in relation to the training of installers, and his availability to handle technical questions.

52. Upon the applicant being given leave to further examine Clamp in chief, a number of additional exhibits were tendered, notably:

(i) The certificate of incorporation of the applicant;
(ii) Two invoices addressed to the applicant by Daniel Sullivan;
(iii) An invoice dated 17 August 1989 from Curlew for 20 Energy Master
units purchased by the applicants;
(iv) Eleven invoices dated between December 1989 and April 1990 in
the name of Energy Master addressed to the applicant for the
purchase of 116 Energy Master units;
(v) Two invoices dated respectively 10 and 17 May 1990 in the name
of Eighthleigh Pty Ltd addressed to the applicant for the
purchase of 4 Energy Master units; and
(vi) A copy of a letter dated 3 August 1990 from the applicant's
solicitors to the respondents' solicitors.

53. When counsel drew the attention of the witness to the fact that the 11 invoices referred to in (iv) above did not mention the names of either the first respondent or the second respondent the witness said that the name Energy Master was a business name owned by either the second respondent or his company but he did not know which. He also said that the units returned in December 1990 were delivered to the second respondent's home which he understood to be also the registered office of the first respondent.

54. The final witness called by the applicant was Daniel Lee Sullivan, an A-Grade electrician with 15 years experience working for an electrical contractor and 5 years as a self employed contractor. He said he was familiar with the Energy Master unit and explained the general function of the unit. In 1990 at the request of the applicant he examined the installation of several Energy Master units. At the Corporate Affairs office the unit was switched to override which meant that it was not functioning. At Lygon Plaza the unit had been wired to the power supply but it had no temperature probe fitted so that it could not work. At University College the unit was switched to override and the temperature settings were inappropriate. At 41-43 Carrington Road, Box Hill, the unit had no probe fitted and at 830 Whitehorse Road, Box Hill, there was no probe and the unit was switched to bypass (which was explained as being the same as override.) Two units were inspected at Methodist Ladies College, 207 Barkers Road, Kew. Both were wired up but were switched to bypass. In addition to the foregoing examination of installations which were not done by himself, the witness also installed a number of other units himself.

55. The invoices submitted by Sullivan to the applicant for the whole of the work undertaken for the applicant totalled $1395 but it is not possible from the information provided in the invoices or from the witness's evidence to quantify the amount of charges specifically referable to work done in relation to inspecting the units he had not personally installed.

56. When cross-examined, Sullivan agreed that he had been able to install Energy Master units successfully but only after hours of experimenting. He expressed the view that the units had a life of about 6 months before breaking down. He had received some training from the second respondent.

57. In addition to the foregoing three other exhibits were tendered. They were:

(a) By consent, the affidavit of George Grenfell-Hoyle sworn 17 May 1991;
(b) By consent, exhibit GJG 2 to the affdiavit of Gary John Clamp
sworn 17 May 1991 being a technical report of Douglas Hibbert
dated 23 June 1990; and
(c) Paragraph 1 of an affidavit sworn by the second respondent on 24
April 1991.

58. Before concluding this survey of the evidence it is appropriate that some mention be made of the affidavit of Gary John Clamp and the 10 documents exhibited to it. To a very large extent the affidavit is a response to affidavits sworn by the second respondent on 8 May 1991 and on 24 April 1991. As the second respondent's affidavits were not in evidence (except paragraph 1 of the affidavit of 24 April 1991) the responses are to some extent unintelligible, and for the most part, the affidavit either addresses issues which were not raised at the trial or recounts the witness's understanding of events based upon hearsay. However, some of the exhibits to the affidavit are relevant and have probative value.

59. I will refer to each exhibit in turn by its exhibit number:

GJC 1 - Four invoices each dated 27 April 1990 addressed to the

applicant and raised by "Energy Master, PO Box 398 Lillydale 3140";

GJC 2 - Report of Douglas Hibbert dated 22 June 1990 (later

tendered as a separate exhibit);

GJC 3 - A newsheet dated 15 September 1989 issued under the name

"Energy Master" by Max Clements;

GJC 4 - Energy Master Test Report (Lygon Court);
GJC 5 - Facsimile transmission dated 31 May 1990 from "Energy

Master, 105 Douglas Avenue, Williamstown, Vic. 3016" addressed to John Ring;

GJC 6 - Bundle of letters (all pure hearsay);
GJC 7 - Bundle of memoranda of telephone calls (all pure hearsay);
GJC 8 - Document 'An introduction to energy saving "The Energy

Master"' (the Energy Master document);

GJC 9 - Energy Master Test Report (A.D.S. 41-43 Carrington Rd);
GJC 10 - 3 Energy Master Test Reports and Test Progress Schedule

(Methodist Ladies College, Kew).
FINDINGS

60. Earlier in these reasons reference has been made to the issue of whether the first respondent is a corporation as defined by section 4(1) of the Trade Practices Act, and in that context the evidence touching upon the status of the first respondent as a body corporate has been canvassed. Although no formal proof of the incorporation of the first respondent has been adduced I am prepared to draw an inference that there does in fact exist a body corporate by the name of Omaq Pty Ltd. It is a matter of record that in these proceedings an appearance was entered on behalf of the first respondent and there is evidence that the second respondent claims to be a director of the first respondent and as recently as 24 April 1991 swore an affidavit in these proceedings asserting his then authority to swear the affidavit on behalf of the first respondent. The existence and incorporation of an entity may be proved by parol evidence (see Cuevas v Freeman Motors Pty Ltd 8 ALR 321) and in this case the evidence is sufficient to prove the existence and incorporation of the first respondent.

61. The evidence also amply supports a finding that at all relevant times the second respondent was a director of the first respondent. This however does not necessarily mean that in everything he did and said he was acting and speaking in the name of the company and on its behalf. Indeed, the evidence tends to suggest the contrary. Although the respondents were not parties to the deed of assignment and nothing has been proved concerning the marketing agreement, the applicant seeks to rely upon that agreement and accordingly it is appropriate to observe that it identifies both the first respondent and the second respondent as the owners of Energy Master. It is therefore not possible to draw an inference from the second respondent's later conduct that he was acting in his capacity as an agent for the company rather than in his personal capacity. If the company had been the sole owner, there could be no difficulty in inferring that the second respondent had acted throughout on its behalf. But that is not the case and no such inference can be drawn. And there is other evidence which positively supports the view that the second respondent acted in his personal capacity. In the document described as "News Sheet", dated 15 September 1989 which is exhibit GJC 3 to Clamp's affidavit of 17 May 1991 no mention is made of the first respondent, whereas the second respondent is described as "Manufacturer and Inventor" and Mr Max Clements is described as "Co-ordinator" and an employee of the second respondent. It should also be noted that none of the other evidence indicates any involvement of the first respondent. The Energy Master document does not identify any author and seems to have been published under the auspices of "Energy Management Consultants" without identifying the proprietorship of that business. The invoices for the cost of installations effected by the second respondent were raised in the name of "Energy Master" again without identifying the proprietorship of the business. Clamp's evidence was that this was a business name used either by the first respondent or the second respondent but he did not know which. In all the circumstances, I am of the opinion that upon the evidence before me no liability can be attributed to the first respondent. Whatever liability may arise from the conduct and statements of the second respondent must attach to him personally.

62. I am satisfied that although the second respondent did not actually hand the Energy Master document to the applicant or its representatives, both he and his employee Clements were well aware that the document had come to the applicant via Curlew and that it was relied upon by the applicant in its dealings with the second respondent. I also find that all of the representations claimed to have been made by the second respondent concerning the nature and function of Energy Master and its use by a number of companies were in fact made by the second respondent and relied upon by the applicant in its dealings with him. The other allegations made by the applicant concerning the obligation of the second respondent to install or supervise the installation of Energy Master units and to train the applicant's employees in the method of installation were promises made by the second respondent in the course of his dealings with the applicant and were an important factor in the applicant's original decision to purchase Energy Master units from Curlew and enter into the business of selling them to consumers. But it is difficult to see how the second respondent's representations concerning Energy Master and any promises he may have made to the applicant could have a bearing upon the business dealings between the applicant and Curlew. It may well be that in the circumstances of the case the representations made in the Energy Master document and in the marketing agreement were adopted by Curlew and could, if proved to have been false, provide the basis of an action by the applicant against Curlew, but I reject the proposition that the second respondent is, in the facts of this case, liable for any loss that may have arisen by reason of the applicant having purchased 255 units from Curlew. During the course of counsel's submissions I invited him to consider whether the applicant should seek to amend the statement of claim to plead a cause of action against the second respondent under the Fair Trading Act (Victoria) but the invitation was not taken up.

63. The comments just made apply equally to the purchase of 4 units from Eighthleigh Pty Ltd in May 1990.

64. This leaves the question of the 116 units purchased by the applicant from the second respondent between 15 December 1989 and 24 April 1990. This aspect of the proceedings arises under both the first and second common law claim, although in respect of the former the claim extends to all of the 375 units purchased. However, the facts pleaded are essentially the same. I accept that it was an implied term of the several contracts whereby the applicant purchased the 116 units that they were of merchantable quality and that the second respondent would provide a 3 year guarantee for each unit. I also find that there was an ongoing arrangement between the applicant and the second respondent that he would either install the units himself (for a charge) or supervise their installation by an employee of the applicant, and that he would provide adequate training for the applicant's employees in the method of installation.

65. There is, however, little evidence relating to the merchantable quality of the units. The facts are that over a period of 9 months between 17 August 1989 and 17 May 1990 the applicant purchased 375 units from 3 different sources. In December 1990 326 units were returned. It follows that 49 units were sold by the applicants. At the most, the evidence suggests that difficulties were encountered in respect of the installation and/or operation of 10 units. There is no evidence as to what became of the remaining 39 and I draw the inference that they were sold and have proved satisfactory. Such complaints as have been particularised in the evidence suggest problems with installation rather than the function of the units themselves.

66. The evidence of Daniel Sullivan effectively disposes of the applicant's allegations of lack of merchantable quality. Sullivan is a qualified electrician who received some training from the second respondent but mainly as a result of his own experimentation was able to successfully install Energy Master units. His estimate was that the units would probably function effectively for about 6 months before requiring further attention but no hard evidence was produced to support this opinion. The absence of such evidence is significant in view of the fact that the applicant's first installations were made in the latter part of 1989 whereas Sullivan was employed, as it appears from his invoices, in June and July 1990. One would expect that if his estimate of the effective life of the units was reliable he would have been able to back it up with some concrete examples. The report of Mr Douglas Hibbert, which was tendered by consent, whilst critical of some aspects of the Energy Master unit inspected by him does not support the assertion that Energy Master is not a product of merchantable quality and is unfit for the purpose for which the applicant purchased it. I do not find anything in the evidence to support the allegation that the units were not of merchantable quality. Nor is there any evidence that the second respondent was ever called upon to honour his obligations (whatever they may have been) under the 3 year guarantee.

67. The letter dated 3 August 1990 which the applicant's solicitors wrote to the solicitors then acting for the respondents contains complaints concerning the installations at the 6 sites referred to in the statement of claim but purports to rescind the several contracts for the purchase of Energy Master units on the ground that "the product is not of merchantable quality and more particularly, not fit fot (sic) its purpose". It seems obvious that even put at its highest, failure to perform the obligation undertaken by the second respondent to install or supervise the installation of units and to train the applicant's employees could not provide a basis for recision of the contracts to purchase the units, and indeed, such was not claimed by the applicant's solicitors in the letter of 3 August 1990.

68. The affidavit of Kenneth George Grenfell-Hoyle, which was tendered by consent, deals with the period he was General Manager of the applicant commencing on 1 January 1990. His evidence is that no trainee installers were employed during the period from 1 January 1990 until 4 May 1990 when a person named Smolka was engaged. There is other evidence that the applicant engaged the electrician Grey in the period from late August or early September 1989 through to October 1989 and that Grey received some instruction from the second respondent. Grey appears to have been a contractor rather than an employee. There was also some evidence from McIntyre that Grey had carried out some installations and that the second respondent had been critical of his work and blamed him for problems which later arose. Grey was not called to give evidence and his absence was not explained. I would have thought that his evidence was critical to any issue based upon an alleged failure of the second respondent to train the applicant's installers and I draw the inference that Grey would not have been able to give evidence supportive of the applicant's case. From the available evidence I am not persuaded that there was any general failure on the part of the second respondent to carry out any contractual obligation he may have been under relating to the installation of units and the training of the applicant's staff.

69. There is some evidence that the second respondent actually installed some of the units at the 6 sites referred to in the statement of claim. Invoices number 71, 72 and 73 (being part of annexure GJC 1 to Clamp's affidavit) relate respectively to charges made by the second respondent for the installation of units at Methodist Ladies College, 41/43 Carrington Street, Box Hill and State Bank Office, Whitehorse Road, Box Hill. Sullivan gave evidence concerning work undertaken by him at these sites in June and July 1990. His invoices do not permit any calculation to be made of the cost of his services relating to the particular sites, nor is there any evidence that the second respondent was ever asked to remedy whatever problems were being experienced at those sites. The condition in which Sullivan found these units upon his inspection is equally consistent with the intervention of some third party after their installation and without further evidence no inference can be drawn that the original installations were faulty. Accordingly, I can make no finding of any breach of the second respondent's contractual obligations to the applicant.
CONCLUSION

70. The applicant's several claims against the respondents will be dismissed. No submissions have been advanced on the question of costs. During the pre-trial stage of the proceedings a number of orders for costs were made and they will, of course, stand. The respondents defaulted in their obligation to file their defences and in my opinion there is no justification to make any costs order in their favour.