World of Technologies (Aust) Pty Ltd v Tempo (Aust) Pty Ltd [2007] FCA 114 (14 February 2007)

CONTRACT – Exclusive distribution certificate issued by overseas manufacturer to Australian importer – Whether consideration provided by importer – Whether importer promised to place orders – Whether certificate constituted contract.

TORT – Inducement to breach of contract – Whether contract existed – Respondent’s knowledge of contract – Intention of respondent – "Reckless indifference" – Whether inconsistent dealing amounted to inducement to breach.

WORDS AND PHRASES – "Signed" – Whether rubber stamp of company name on document constituted signature of company.

DESIGNS – Validity of registration – Novelty – Whether design published in document – Design applied to new product sent for testing and certification – Whether design publicly used in Australia – Designs Act 2003 (Cth), s 15.

DESIGNS – Invalid registration of design – Threats of proceedings based on registration – Whether threats unjustified – Whether addressee of threats suffered damage thereby – Designs Act 2003 (Cth), s 77.

DESIGNS – Owner of design – Derivation of "title" to design – Authority of design owner to register design in owner’s name – Whether gave rise to "title" to design – Whether gave rise to right to call for assignment of design – Designs Act 2003 (Cth), s 13.

DAMAGES – Unjustified threat of proceedings for infringement of registered design – Addressee holding itself out of market as a result of threat – Whether addressee sufficiently proved foregone sales – Designs Act 2003 (Cth), s 77.

Designs Act 2003 (Cth): ss 13(1), 14(1), 15, 16, 17(1), 19, 71, 77(1), 77(3), 93
Evidence Act 1995 (Cth): ss 69, 79, 135

Allstate Life Insurance Co v Australian and New Zealand Banking Group Ltd (1995) 58 FCR 26
Australian Securities and Investments Commission v Vines (2003) 48 ACSR 291
British Empire Films Pty Ltd v Oxford Theatres Pty Ltd [1943] VLR 163
British Industrial Plastics Ltd v Ferguson [1940] 1 All ER 479
British Motor Trade Association v Salvadori [1949] Ch 556
D C Thomson & Co Ltd v Deakin [1952] Ch 646
De Francesco v Barnum (1890) 63 LT 514
Delphic Wholesalers Pty Ltd v Elco Food Co Pty Ltd (1987) 8 IPR 545
Emerald Construction Co Ltd v Lowthian [1966] 1 WLR 691
Goodman v J. Eban Ltd [1954] 1 QB 550
Lazarus Estates Limited v Beasley [1956] 1 QB 702
McRae v Coulton (1986) 7 NSWLR 644
Meyappan v Manchanayake (1961) 62 NLR 529
Motel Marine Pty Ltd v IAC (Finance) Pty Ltd [1964] HCA 7; (1964) 110 CLR 9
Muirhead v Commonwealth Bank of Australia (1996) 139 ALR 561
Oceanic Sun Line Special Shipping Company Inc v Fay [1988] HCA 32; (1988) 165 CLR 197
Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; (2003) 196 ALR 257
R v Moore (1884) 10 VLR 322
Sanders v Snell [1998] HCA 64; (1998) 196 CLR 329

WORLD OF TECHNOLOGIES (AUST) PTY LTD v TEMPO (AUST) PTY LTD
VID712 OF 2006

JESSUP J
14 FEBRUARY 2007
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID712 OF 2006

BETWEEN:	WORLD OF TECHNOLOGIES (AUST) PTY LTD Applicant
AND:	TEMPO (AUST) PTY LTD Respondent
AND BETWEEN:	TEMPO (AUST) PTY LTD Cross-Claimant
AND:	WORLD OF TECHNOLOGIES (AUST) PTY LTD Cross-Respondent

JUDGE:	JESSUP J
DATE OF ORDER:	14 FEBRUARY 2007
WHERE MADE:	MELBOURNE

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID712 OF 2006

BETWEEN:	WORLD OF TECHNOLOGIES (AUST) PTY LTD Applicant
AND:	TEMPO (AUST) PTY LTD Respondent
AND BETWEEN:	TEMPO (AUST) PTY LTD Cross-Claimant
AND:	WORLD OF TECHNOLOGIES (AUST) PTY LTD Cross-Respondent

JUDGE:	JESSUP J
DATE:	14 FEBRUARY 2007
PLACE:	MELBOURNE

1 This proceeding concerns a 2200 watt bagless vacuum cleaner manufactured in China. The parties are both Australian importers and wholesalers of electrical appliances. The applicant was the first to import the vacuum cleaner from China, and secured design registration under the Designs Act 2003 (Cth) ("the Designs Act") in relation to the product. It also claims to have a contract with the Chinese manufacturer for the exclusive distribution rights for the product in Australia. But the Chinese manufacturer has also supplied the respondent with large quantities of the same vacuum cleaner, knowing that the respondent’s purpose was their wholesale distribution in Australia. Within this broad context, the case raises issues of the validity of the applicant’s registered design, whether a letter of demand sent on behalf of the applicant constituted an unjustified threat of design infringement, whether the respondent induced the manufacturer to breach a contract which it had with the applicant, and associated questions to which I shall turn in due course.

2 The applicant, World of Technologies (Aust) Pty Ltd, is an importer and wholesaler of household goods and electrical appliances, including vacuum cleaners. Many of these goods are sourced from China and are sold by wholesale in Australia under the applicant’s brand "Genius". Although the applicant imports only seven products, it lists many more – possibly up to about 100 it would seem – on its web site on the basis that it would be able to obtain those products should a retailer show an interest in them. The applicant does not import goods in the hope or expectation of finding an Australian buyer for them. Rather, its modus operandi is to secure firm orders for particular goods from Australian retailers, and then to fill those orders by ordering the goods in question from the overseas supplier. If the arrangements made by the applicant as disclosed in the evidence in the present case are typical, the applicant needs first to identify a product from an overseas source, then to reach some kind of understanding with the supplier about price and other commercial details, and finally to procure a retailer in Australia to place orders for the product. The orders are filled, it seems, by the overseas supplier sending the goods direct to the retailer. Physically, the goods do not pass through the custody of the applicant. Neither does the applicant carry the risk of unsold goods in the Australian market.

3 Mr Peter Jabbour describes himself as the managing director of the applicant, although he is not a director. The only director and shareholder of the applicant is Mr Jabbour’s wife who, according to Mr Jabbour, stays at home and is not involved in the business much. Mr Jabbour is manifestly the directing mind and will of the applicant – in his words, he is "looking after the company". He was the only representative of the applicant who gave evidence.

4 Neither Mr Jabbour nor his daughter (Tania Varela, who works for the applicant) speaks Chinese. For this reason, and also because of the particular way the Chinese do business, and the importance of establishing a relationship of trust with the Chinese, the applicant uses the services of an agent based in Singapore, Mr Giyoke Tseng, who is fluent in Chinese and English. Mr Tseng’s role, it seems, is (or at least includes) making contact with Chinese suppliers and functioning as the applicant’s representative in the establishment of the terms upon which it would do business with those suppliers.

5 The respondent, Tempo (Aust) Pty Ltd, is an importer and wholesaler of household consumer items, including vacuum cleaners. Mr Nicholas Stergiotis is its sole director and shareholder. The business conducted by the respondent was originally conducted (by another company) under the name "Onix". That business appears to operate along similar lines to those of the applicant’s business. Like the applicant, the respondent sources household goods from overseas suppliers and, if what is disclosed by the evidence is typical, places orders with those suppliers only upon receipt of an order from an Australian retailer. Also like the applicant, the respondent conducts its business through agents or representatives in Asia. Its arrangements in that regard appear to be a little more developed than those of the applicant. Mr Stergiotis is also the sole director and shareholder of Global Asia Pacific (HK) Ltd ("GAP"), a company based in Hong Kong. When the respondent sources products from China, it does so through GAP. When such products are sourced from Shanghai or northern China (such as Suzhou), GAP in turn engages an agent to deal with the Chinese factory. The agent concerned in the transactions which became relevant in the present case was Cuori International (HK) Co Ltd ("Cuori").

6 On the retail side, for the purposes of this case it will be sufficient to note that there are two categories of major retailers which have an involvement in vacuum cleaners. The first is made up of stores which specialise in the product and carry a wide range of different makes and models. The retailer in this category which was the subject of particular attention in this case is Electrical Home Aids Pty Ltd, which trades as "Godfreys" in New South Wales, Queensland, South Australia, Western Australia and the mainland Territories (but not in Victoria and Tasmania, where an unrelated company trades as "Godfreys", also in the retailing of vacuum cleaners). I shall refer to Electrical Home Aids Pty Ltd as "Godfreys".

7 The second category of retailers is made up of large variety chain stores which sell many different products of which vacuum cleaners are only one. They tend to select particular vacuum cleaners for sale as promotional items from time to time. They do not stock a range of different models. They include retailers such as Woolworths, Homeart, The Warehouse, Go-Lo, Crazy Clarks, K-Mart and Target.

8 It seems that bagless vacuum cleaners appeared on the Australian homewares retail scene about five years ago. It is said that they have certain advantages over cleaners of the traditional design which use a bag for dust collection. There are about 50 different bagless vacuum cleaners presently being offered at retail in Australia. The competition is intense, particularly since manufacturers in China have commenced to supply the market. I gather from the tenor of the evidence that the principal characteristics of a particular vacuum cleaner which are thought to be attractive to the consumer are power, appearance and price. Specifically, it is common ground that, other things being equal, a consumer would almost inevitably prefer a higher-powered model over a lower-powered model. At about the end of 2004, there was no vacuum cleaner on the market with a power of 2200W or greater.

9 On 14 December 2004, Mr Tseng received an email from the General Manager of Suzhou Fak Electric Co Ltd ("Suzhou Fak"), a company based in Suzhou, China. He sought to interest Mr Tseng in a new cyclonic bagless vacuum cleaner manufactured by Suzhou Fak, which had the model designation MC-801. On the same day, Mr Tseng replied by email in which he said that the new model looked "not bad", and that he had a customer in Australia who bought lots of vacuum cleaners. However, he stipulated a number of conditions which would have to apply if his customer were to take the MC-801: a very attractive price, very good quality, very good performance and "exclusive distribution support to succeed". He said, in effect, that these conditions were necessary because of the competitive nature of the market.

10 On 16 December 2004, Mr Tseng received an email from the owner of Suzhou Fak, Mr Terry Ding. His response to Mr Tseng’s conditions was encouraging. In relation to the requirement of exclusive distribution, Mr Ding mentioned another company of which he had been the marketing manager, and added "your success means my achievement". Mr Tseng replied the same day, indicating that he would introduce the MC-801 to his "Australia / New Zealand customer". He said that, if they were going to proceed, they would have to do so immediately.

11 On 20 December 2004, Mr Tseng sent an email to Mr Jabbour, in which he said that he had a friend who had recently set up his own vacuum cleaner factory, and that their first model was a very powerful one, the MC-801. Mr Tseng said that he would contact Mr Jabbour later to explain further, and "if OK, I will go back to discuss further detail with them to get exclusive to secure our effort so that we can add this new model into our 2005 new product line".

12 On 24 December 2004, Mr Tseng sent Mr Jabbour a further email, which was tendered by the respondent. It read:

13 In late December 2004, Mr Tseng sent Mr Jabbour a statement of the technical specifications for the MC-801. Mr Jabbour thought that Godfreys would be interested in the product. He sent a copy of the specifications to the Managing Director of Godfreys, Mr John Hardy. In discussions about the proposal with Mr Jabbour, Mr Hardy said that he would consider stocking and promoting the vacuum cleaner only if the applicant guaranteed "exclusivity", that is to say, promised a situation in which Godfreys would be the only retailer stocking the product. If that were done, Mr Hardy said that he would place an initial order for at least 5,000 units, and thereafter place orders according to demand. He asked Mr Jabbour for samples for testing, and for development of the artwork (for the outside of the box in which the product would be sold).

14 On about 5 January 2005, Mr Jabbour telephoned Mr Tseng and told him that the applicant would be interested in importing the vacuum cleaner, providing that Suzhou Fak could guarantee exclusive supply into Australia. On 7 January 2005, Mr Tseng emailed Mr Jabbour in the following terms.

15 On 10 January 2005, Mr Tseng sent Mr Jabbour an electronic copy of a document produced by Suzhou Fak, and headed with the name, address and telephone and facsimile numbers of that company. The content of the document was as follows:

16 It appeared from evidence of the way in which transactions between the applicant and Suzhou Fak later proceeded that the reference to "1% free spare parts" did not mean spare parts at all; rather, it signified that, with every order of vacuum cleaners, Suzhou Fak would include a further number of units free of charge, amounting to 1% of the number of paid for. That is to say, with every 100 units purchased and paid for, Suzhou Fak would include one more unit.

17 It will be seen that the authorisation referred to in the second paragraph of the exclusive distribution certificate was to be effective from the date the certificate was "signed". Below the text, there was an execution line, introduced by the word "Authorizer" and under which appeared Mr Ding’s name and position with Suzhou Fak. There was no signature on the line. Instead, there was the impression of a circular stamp, in the centre of which was a 5-pointed star, and around the inside circumference of which were Chinese characters. There was no evidence as to the meaning or significance of this stamp.

18 After the issue of the exclusive distribution certificate on 10 January 2005, there is no evidence of any relevant event for the next 10 weeks or so. It is a fair inference that Mr Ding was starting to become concerned, since on 22 March 2005 Mr Tseng wrote to Mr Jabbour by email, in which he referred to a conversation which he had just had with "2200W Bagless supplier". The supplier – probably Mr Ding – had "confirmed" that no-one from Australia had made contact "in the past days", but –

The email mentioned that documents referred to as "the GS/CE/EMC Test Report & Certificate copy" had been sent to Mr Jabbour two days previously, and that "the GS certificate" was attached to the email.

19 In late March 2005, the applicant supplied Godfreys with a sample of the MC-801 vacuum cleaner for testing.

20 Over the period 16-20 April 2005, the Chinese Export Commodities Fair ("the Canton Fair") was held in Guangzhou. Manufacturers from all over China had their products on display. Mr Stergiotis went to that fair, in company with Mr Vinay Mahtani, Manager of GAP, and Mr Simon Woodward, Senior Buyer for Discount Variety Group ("DVG"), a division of Miller Retail Ltd (the company which operated Crazy Clarks, Makro Warehouse and Go-Lo variety chain stores). One of the Chinese manufacturers with products on display was Suzhou Fak. The MC-801 was on display. On the first day that they attended the fair, Mr Stergiotis and Mr Mahtani (unaccompanied then by Mr Woodward) looked over many products on display, and encountered the MC-801 at the Suzhou Fak booth. They spoke to Mr Ding, who gave them a brochure for the product. Mr Stergiotis liked what he saw, and thought that the vacuum cleaner would sell well in Australia. On the following day, he and Mr Mahtani returned to the Suzhou Fak booth in company with Mr Woodward. Mr Woodward was very impressed with the MC-801. Mr Stergiotis took photographs of the product. Mr Ding asked Mr Stergiotis how big a company the respondent was, and how successful it would be in retailing his product.

21 There is a question whether Mr Stergiotis was told by Mr Ding, at the Canton Fair in April, that another wholesaler had already secured the exclusive right to distribute the MC-801 into the Australian market. In chief, Mr Stergiotis said that Mr Ding then told him that, if the respondent placed an order for the product for delivery to Australia, Suzhou Fak would accept and fill that order. No evidence that he gave under cross examination was inconsistent with what he said in chief – indeed, he was cross examined from a standpoint which appeared to accept what he said in chief. Mr Woodward gave evidence that he asked Mr Ding whether the MC-801 was available for sale to Australia, and he received a response in the affirmative. He was not cross examined on that evidence. Mr Mahtani did not say anything specifically about the matter in chief, but he was cross examined as though he had come away from the fair with the impression that the product was available for sale to Australia. When it was put to him that he thought that Mr Ding had offered to supply the product, he responded, "he was confirmed". It was then put to him that he was surprised when Mr Ding later refused to supply, and Mr Mahtani responded, "just disappointed". Notwithstanding the apparent consistency of the evidence of all three witnesses, at a point in the cross examination of Mr Mahtani, he said that it was in April 2005 that he became aware that Suzhou Fak had an arrangement with another Australian company for the supply of the MC-801. Whether this awareness arose from something that Mr Ding had said at the fair, and/or in the presence of Mr Stergiotis, was not explored. In the circumstances, including the record of Mr Stergiotis’s reaction in his email of 16 May 2005 to which I refer below, I think it most probable that Mr Ding said nothing at the fair, or until his email of 6 May 2005 to which I also refer below, to qualify what I find to be a statement by him, made at the fair, to the general effect that the MC-801 was available for sale to Australia.

22 A number of things happened in May 2005 involving, quite separately, the applicant and the respondent. After returning to Australia from the Canton Fair, Mr Stergiotis gave the MC-801 brochure that he had obtained from Mr Ding to Phillip Tin, the respondent’s product manager. Mr Tin scanned the images of the MC-801 on to his computer, and used that to create electronic files which he subsequently used to create representations of the vacuum cleaner on the respondent’s web site. He created the electronic files on 25 May 2005.

23 On 6 May 2005 Mr Stergiotis sent an email to Mr Ding in which he referred to their conversation at the Canton Fair. He sought further information about, and samples of, the MC-801. He asked Mr Ding to keep in mind that he represented large Australian retailers, and that his prices should reflect large quantities. Mr Ding responded by email immediately, saying that "one customer has ... the exclusive rights in Australia market" so he could not supply samples. On 16 May 2005, Mr Stergiotis wrote again to Mr Ding by email, saying:

24 Meanwhile, and before Mr Ding replied to Mr Stergiotis, certain things happened involving the applicant and its distribution of the MC-801 in Australia. In par 18 above I referred to a test report and certificate sent to the applicant. It seems that these related to the need to obtain a certificate of approval for the sale of a new electrical article required by Australian law. Mr Jabbour explained in evidence that he sought a certificate in Queensland because that involved a process for approval which was quicker than elsewhere. On 16 May 2005, the Director – Equipment Safety of the Electrical Safety Office within the Queensland Department of Industrial Relations signed a "Certificate of Approval for an Electrical Article" under the Electrical Safety Act 2002 (Qld) ("the Electrical Safety Act") in relation to the MC-801, showing a date of registration of 11 May 2005. The registration was for a period expiring on 11 May 2010. The applicant sent a copy of that certificate to Godfreys on 19 May 2005.

25 The applicant received its first order for MC-801 vacuum cleaners from Godfreys on 18 May 2005. It was for 1,000 units. They were to be sold under the applicant’s brand "Genius". On the same day, the applicant placed that order with Suzhou Fak. By comparison with orders later made by the respondent for the same product (to which I refer below), it is probable that Mr Ding regarded this as a rather modest order. However, the applicant subsequently placed fairly regular orders with Suzhou Fak for the MC-801 vacuum cleaner. It appears that about 26,000 units had been ordered to the end of December 2005.

26 On 27 May 2005, Mr Ding dispatched two emails, although it appears that they were sent many hours apart on that day. First, he wrote to Mr Stergiotis. He said:

Mr Ding then said "I would give my offer", and named a price of $US30 per unit FOB Shanghai. He set out the specifications of the vacuum cleaner the subject of that "offer", and continued:

The respondent appears to have done nothing immediately about Mr Ding’s email of 27 May 2005.

27 Mr Ding’s second email on 27 May 2005 was to Mr Tseng. He said he was very worried about "the marketing development in Australia". He continued:

28 On about 30 May 2005, the applicant received from Suzhou Fak a document dated that day and headed "Design Registration Authorization". The document read:

29 On 16 June 2005, the applicant applied for registration of the design of the MC-801, described in the application as a "bagless vacuum cleaner". On 11 November 2005, the design of the vacuum cleaner was registered under the Designs Act in the applicant’s name.

30 On 13 July 2005, Mr Mahtani sent an email to Mr Ding, asking to be offered the MC-801 (and the MC-802, a more recent model of bagless vacuum cleaner which was, it seems, soon to be released by Suzhou Fak), and saying that the information was needed urgently to secure an order. Mr Ding replied the following day, saying that "MC-801 has whole closed for Australia and NZ". Under cross examination, Mr Stergiotis denied that he understood that statement as conveying that some other company had "exclusivity" for the countries mentioned. He suggested that he was somewhat confused by the position taken by Mr Ding, adding, "as dealings with China, things change on a daily basis". Ultimately, he said that he "didn’t think much of it at all and just forgot about it". Although nothing turns on it, I can understand that Mr Stergiotis might have been confused by the communications he had received from Mr Ding. On 27 May 2005, Mr Ding had said that "at last" he did not give the applicant exclusivity, while suggesting that the respondent try New Zealand "in order to avoid any confusion". Then on 14 July 2005, Mr Ding said that the MC-801 had "whole closed" for Australia and New Zealand.

31 There is no direct evidence that the respondent sought to respond to Mr Ding’s "whole closed" email by pressing him to supply it with the MC-801 vacuum cleaner. However, pursuant to s 69(2)(b) of the Evidence Act 1995 (Cth) ("the Evidence Act"), and over the objection of the respondent, I admitted into evidence an email from Mr Tseng to Mr Jabbour dated 12 August 2005. It read:

Under cross examination, Mr Mahtani and Mr Stergiotis were both asked about the possibility (suggested in this email) that, in August 2005, the respondent was seeking to place orders for the MC-801. Mr Mahtani said that, after receiving Mr Ding’s email of 14 July 2005, his Ningbo office (Cuori) "perhaps" contacted Mr Ding and tried to have him supply the product. He agreed that there would not have been an inquiry about 5 container-loads of the product without the respondent having a definite purchaser in Australia. Mr Mahtani could not recall whether Cuori told him that Suzhou Fak would not supply at that time. For his part, Mr Stergiotis could not recall any attempt by or on behalf of the respondent to order the MC-801 in August 2005.

32 In October 2005 Mr Stergiotis and Mr Mahtani again went to the Canton Fair, and again spoke to Mr Ding at the Suzhou Fak booth. Mr Stergiotis had been given an opportunity to submit a new vacuum cleaner for a December promotion at Woolworths by Mr Ray Marten, a buyer with that retailer. Mr Stergiotis noticed the MC-801 on display, together with what he described as a "new model" (which was in fact the MC-802). Mr Ding said that he would like to supply the new model to the respondent. Mr Stergiotis said that he preferred the MC-801, and asked Mr Ding: "Will you sell me the MC-801?" Mr Ding said: "I will think about it and let you know".

33 That evening, Mr Ding telephoned Mr Mahtani on his Chinese mobile number and informed him, "I have good news to you. I can supply the product. Come on tomorrow morning and we will talk about it." Mr Stergiotis then rang Mr Marten, who said that he was interested in the MC-801, and gave Mr Stergiotis a verbal commitment to order at least 10,000 units. The following day, Mr Stergiotis and Mr Mahtani returned to the Suzhou Fak booth at the fair. Mr Stergiotis told Mr Ding that he had a customer interested in the MC-801, and they proceeded to discuss the details of an order, including price, quantities, production schedule, delivery dates and product colours.

34 Following further discussions with Mr Marten on Mr Stergiotis’s return to Australia, on 21 October 2005 the respondent issued a purchase order with GAP for 11,500 units of the MC-801, to which the respondent had given its own designation, "SL-500". GAP passed the order on to Cuori, and Cuori placed a corresponding order with Suzhou Fak. Woolworths confirmed its order for 11,500 units on 23 October 2005. The order was subsequently filled, and the vacuum cleaners were delivered to Woolworths, where they were sold as "Onix SL-500". By the week ending 1 January 2006, Woolworths had sold slightly more than 9,000 of these vacuum cleaners, which Mr Marten described (in an email to Mr Stergiotis of 5 January 2006) as "an exceptional result".

35 Homeart is one of the respondent’s long standing customers. It normally places its orders orally. Following discussions between Mr Stergiotis and the Managing Director of Homeart, Homeart ordered 15,000 units of the SL-500. The date of those discussions was not disclosed, but may be inferred from a written order for 15,000 units placed by the respondent on GAP on 9 December 2005, and which, according to Mr Stergiotis, represented the Homeart order. There was no evidence that GAP did anything further about that order at that stage.

36 On 5 January 2006, it came to Mr Jabbour’s attention that a bagless vacuum cleaner, very similar (in his view) to the MC-801 was being advertised on an internet auction site known as "eBay". The internet advertisement showed a representation of the item being auctioned, under which the following paragraph appeared:

Mr Stergiotis denied that the respondent had anything to do with this entry on the eBay internet site, and there is no evidence that it did. However, what was advertised was an Onix SL-500 product, which was the MC-801 as marketed by the respondent.

37 Mr Jabbour immediately wrote to Mr Tseng by email. He referred to his discovery that the bagless vacuum cleaner was being sold in Australia by someone else, and said that his "buyer" (by which he meant Godfreys) knew of the matter and had threatened to stop selling the vacuum cleaner and to cancel all their orders. He asked Mr Tseng to warn Suzhou Fak that if they did not stop selling the vacuum cleaner to someone else, he would "take legal action not only on the buyer Onix".

38 It seems that Mr Tseng promptly contacted Mr Ding by email. Although that email is not in evidence, Mr Ding’s reply, dated 5 January 2006, is. The reply was in these terms:

39 There was indirect evidence that, in early January 2006, a staff member of Godfreys reported that a vacuum cleaner that was identical to the Genius product which Godfreys obtained from the applicant was being sold in the Homeart store at Hornsby at a price of $79 (compared with the Godfreys price of $149). The staff member was not called. It was not stated that the staff member had actually seen the product (or a box containing the product), and there is evidence from which it may be inferred that he or she did not. In an email of 12 January 2006 complaining to the applicant about this circumstance, Mr John Hardy said that the staff member had visited the store where the cheaper product was sold, and had been told that the store was out of stock, but would provide a "rain check". The respondent led evidence that it had not sold the SL-500 to Homeart at that stage. There appears to be little possibility that the staff member was confused, and in fact visited a Woolworths store, since it appears that Woolworths do not provide rain checks, while Homeart does. The respondent suggested that the staff member was most probably confusing the SL-500 with another, less powerful, vacuum cleaner also distributed under the "Onix" brand, the SL-217. The latter was sold by Homeart. The state of the evidence in these respects is most unsatisfactory. By reason of findings which I shall make later in these reasons, I do not need to resolve the question whether the product which came to the attention of Godfreys at Hornsby was the SL-500 or the SL-217. It is sufficient to find, as I do, that by January 2006 Godfreys suspected that some other retailer was selling the MC-801, and that (perhaps unbeknownst in point of detail to Godfreys) Woolworths was in fact doing so, or at least had recently done so. In his email to the applicant of 12 January 2006, Mr Hardy said that, while another retailer offered the same product at a substantially lower price, his company could not support the product. He said that, unless he had the applicant’s assurance that the product would remain exclusive to Godfreys, he would have to consider cancelling all orders.

40 Possibly prompted by the events to which I have just referred, on 13 January 2006 the applicant applied for an expedited examination of its registered design under Ch 5 of the Designs Act.

41 There is no evidence that the respondent was, at about mid-January 2006, aware of the applicant’s discovery that the MC-801 was being sold otherwise than by Godfreys. As I have mentioned, Mr Marten, of Woolworths, was impressed with the sales result achieved by the respondent’s Onix SL-500 product, and on 19 January 2006 ordered a further 10,000 units for the Woolworths April promotion. The respondent proceeded to order a further 10,350 units from GAP, which placed a corresponding order with Cuori. On 20 January 2006, Cuori placed an order for these vacuum cleaners with Suzhou Fak. However, by reason of the intervention of the applicant as I describe below, this order was never filled.

42 On 20 January 2006, Mr Ding wrote by email to the respondent. He said that the applicant had found the "SL-500" being sold in Australia. He set out some passages from the applicant’s email of 5 January 2006 (which I infer was sent on to him by Mr Tseng), and continued:

43 On 23 January 2006, Mr Tseng sent an email to Mr Ding in the following terms:

Mr Ding sent a copy of this email to the respondent. In a covering email, he said that his customer (the applicant) was very angry, and that he could not accept any new order from the respondent. Mr Stergiotis replied immediately, in the following terms:

44 On the following day, 24 January 2006, Mr Ding replied to Mr Stergiotis, seeking to persuade the respondent not to purchase the MC-801. He said that, although he did not know Australian law well, he preferred to take it as a serious matter. He said he would rather give up the respondent’s order than have further troubles. He continued:

After receiving this email, Mr Stergiotis spoke to Mr Ding by telephone on the same day. He told him that the applicant had not contacted the respondent, that the respondent had committed to its customer and that it needed Suzhou Fak to fulfil the order. Although Mr Stergiotis could not recall any other details of the conversation, the gist of it may be inferred from an email which Mr Ding sent to him afterwards, but still on 24 January 2006:

45 In the meantime, Mr Mahtani, who had received a copy of Mr Ding’s first email to Mr Stergiotis on 24 January 2006, replied to Mr Ding on the same day, pointing out that "we" (presumably the respondent or GAP) had already arranged for the 10% deposit to be paid – nearly $US30,000. He said that the respondent had a contract with its customer which must be honoured. He said that they had to go on with the order as it had already been confirmed, and it was very hard to change at that stage. He concluded:

Mr Ding replied with a very short email: "Don’t arrange this 10% deposit. Pls!" If the times displayed on Mr Ding’s various emails are to be believed, it seems that this email was sent a little more than an hour after his second email to Mr Stergiotis on 24 January 2006.

46 On the following day, 25 January 2006, Mr Mahtani wrote again to Mr Ding. He said that he was very disappointed with the way Mr Ding was "treating this order". He said that the respondent had already confirmed the order with the biggest retailer in Australia, "... so there is no way of backing out now!" He continued:

47 Mr Ding replied on 26 January 2006 that he could not accept the order. However, it seems that there were continuing negotiations between Cuori and Suzhou Fak about the payment terms which Mr Ding would be prepared to accept to proceed with the order. There is an email from Cuori to Mr Stergiotis sent in the evening of 26 January 2006 in which the writer refers to discussions with Mr Ding in which Mr Ding eventually indicated a readiness to supply upon immediate payment of a 35% deposit, and subject to certain other terms. Cuori sought Mr Stergiotis’s instructions on this proposal. Then, early in the morning of 27 January 2006, Cuori sent GAP and the respondent an email setting out the final terms which it had agreed with Suzhou Fak. There was to be an immediate deposit of 30% (10% of which had already been paid), a further payment of 50% before shipment and a final payment of 20% upon receipt of the bill of lading. In an affidavit read by the respondent, Mr Stergiotis said that these were the terms that were "ultimately agreed".

48 At this point, it seems, the respondent received a letter of demand from the applicant’s solicitors. The letter was dated 23 January 2006, but Mr Stergiotis thinks he received it on about 27 January 2006. He thought that the letter may have been delayed as a result of the respondent’s change of address. The letter referred to the applicant’s registered design, and to the appearance on the respondent’s internet web site of a promotion for the Onix vacuum cleaner. It alleged that this product, to which it referred as "the infringing product" was identical in appearance to the applicant’s "Genius" product, "for which our client has been granted a monopoly". It alleged infringement of the applicant’s registered design in breach of s 71 of the Designs Act, and misleading conduct contrary to s 52 of the Trade Practices Act 1974 (Cth) ("the Trade Practices Act"). It sought a series of undertakings from the respondent by 27 January 2006.

49 After receiving the applicant’s solicitors’ letter, Mr Stergiotis told Homeart that the respondent would not be able to supply the SL-500 product. Homeart did not place an alternative order. Also as a result of that letter, the respondent cancelled the order it had placed with Suzhou Fak. The vacuum cleaners were intended for Woolworths, and that retailer ultimately took a corresponding delivery of the less powerful bagless vacuum cleaner, the SL-217. Subsequently, Mr Ding told Mr Stergiotis that he was still interested in doing business with the respondent. The two men discussed the possible re-design of the MC-801 vacuum cleaner so as to avoid infringement by the respondent of what Mr Stergiotis then believed were the applicant’s design rights. It appears that nothing further came of such a proposal.

50 On 21 March 2006 the Registrar of Designs certified that the examination of the applicant’s registered design had been completed.

51 On 18 April 2006 the present proceeding was commenced in the Federal Magistrates Court. It was transferred into this court on 23 June 2006.

52 In June 2006, Mr Stergiotis and Mr Mahtani visited a number of vacuum cleaner factories in the Suzhou area in China. They met with Mr Ding, who showed them details of the Suzhou Fak range of vacuum cleaners, including the MC-801. Mr Ding said that he was not happy with the volume he was achieving from the applicant, and said that if the respondent wanted to order the MC-801 again, Suzhou Fak would supply it. Mr Stergiotis responded that he could not sell the product in Australia while the design was still registered by the applicant.

53 Mr Stergiotis and Mr Mahtani met Mr Ding again at the Canton Fair in October 2006. Mr Ding again offered to supply the MC-801 vacuum cleaner to the respondent, but again Mr Stergiotis said that he could not order it at that time.

54 The applicant sues on three causes of action. First, it alleges that, by displaying an image of the MC-801 bagless vacuum cleaner on its internet web site, by offering the vacuum cleaner for sale, and by selling the vacuum cleaner, the respondent infringed its registered design. Secondly, it says that there was, on and since 10 January 2005, a contract between itself and Suzhou Fak by which it, the applicant, would be the exclusive distributor of the MC-801 vacuum cleaner in Australia. It says that the respondent prevailed upon Suzhou Fak to provide the vacuum cleaner for resale in Australia, and thereby induced a breach, or interfered with the performance, of that contract. Thirdly, it says that, by promoting the vacuum cleaner for sale in Australia, the respondent has engaged in conduct, in trade and commerce, which is in contravention of ss 52 and 53 of the Trade Practices Act.

55 Although it admits the fact of the registration of the applicant’s design, the respondent otherwise joins issue with the applicant’s case. Further, it cross-claims for a revocation of the registration of the design, upon the ground that the design was not new or original and distinctive at the priority date as registered by s 15(1) of the Designs Act. In this respect, the respondent relies upon the display of the MC-801 vacuum cleaner at the Canton Fair in April 2005, upon the subsequent publication of certain brochures in which the vacuum cleaner was displayed, and upon the publication of a representation of the vacuum cleaner on the respondent’s internet web site in May 2005. Alternatively, it says that the applicant was not entitled to procure the registration of the design, as it was not "an entitled person" within the meaning of the Designs Act. The respondent says that the letter of demand from the applicant’s solicitors dated 23 January 2006 was an unjustified threat of infringement proceedings, both by reason that the design was not properly registered, and by reason of the absence of any certificate of examination in relation to the design at the time when that letter was written (as to which the respondent relies upon s 77(3) of the Designs Act). It denies any infringement of the applicant’s design. It does not admit the making of any agreement between the applicant and Suzhou Fak in January 2005, and says that it knew of the "exclusive certification" document dated 10 January 2005 only in October 2006 when provided with a copy of it by the applicant. It refers to the Canton Fair in April 2005, and to the statement on behalf of Suzhou Fak at that time that it would fulfil any order placed for the MC-801 bagless vacuum cleaner for delivery to Australia. It says that, in May 2005, Suzhou Fak told it (the respondent) that the applicant had requested exclusivity in Australia, but that that had been refused. It refers also to the Canton Fair in October 2005, and to the statement on behalf of Suzhou Fak at that time that any order for delivery in Australia would be fulfilled. It denies that it purchased MC-801 vacuum cleaners for the purposes of resale in Australia, and it denies that it intended to interfere with the agreement of January 2005 between the applicant and Suzhou Fak. It denies the allegations under the Trade Practices Act.

56 On the fourth day of the trial, the applicant abandoned its claim for design infringement. At the same time, Mr Panna SC, who appeared for the applicant, indicated that he would not make any submission in opposition to the respondent’s claim that the design registration was invalid. Since the applicant does not concede invalidity – nor consent to an order for revocation – I am required to decide those matters. On the fifth day of the trial, the applicant abandoned its claim under the Trade Practices Act.

57 In the result, I am required to determine the applicant’s claim in tort, and the respondent’s claims for revocation and for damages for unjustified threats. I shall commence with the claim for revocation.

58 Under s 15(1) of the Designs Act, a design is a "registrable design" if it is "new and distinctive" when compared with the "prior art base for the design" as it existed before the priority date. By subs (2) the "prior art base" consists of three items, including "designs publicly used in Australia" and "designs published in a document within or outside Australia". By s 16(1) a design is new "unless it is identical to a design that forms part of the prior art base". A design is distinctive "unless it is substantially similar in overall impression to a design that forms part of the prior art base". In considering the matter of substantial similarity, I am required, by s 19(1) of the Act, to give more weight to similarities between the subject design and the prior art base than to differences between them. In the present case, the application for design registration did not include a statement of newness and distinctiveness, in which circumstances I am required, by s 19(3) of the Designs Act, to have regard to the appearance of the design as a whole. If I am satisfied that the subject design was not a registrable design within the meaning of s 15(1) of the Designs Act at the priority date, I am empowered to revoke the registration of the design pursuant to s 93(3)(a) of the Act.

59 In the circumstances of the present case, the priority date is the date of application for registration, 16 June 2005.

60 The respondent relies first upon the publication, at the Canton Fair in April 2005, of a brochure depicting the appearance of the MC-801 vacuum cleaner, for the purposes of s 15(2)(b) of the Designs Act. The original of that brochure is before the court. I have compared the brochure with the design as registered. It is common ground that the vacuum cleaner shown in each document is one and the same product. The copy of the registered design which is before the court is a photocopy. The representations of the vacuum cleaner in it are less distinct than the corresponding printed colour photographs appearing on the Suzhou Fak brochure of April 2005. Further, in the design as registered the product is shown in side view (both sides), in bottom view, in top view, in back view, in front view, in back perspective view and in front perspective view. As represented on the brochure, the product is shown only in front perspective view. For that reason, I am unable to conclude that the design is identical to that shown in the brochure. Accordingly, I do not hold that the design is not new for the purposes of s 16(1) of the Designs Act.

61 However, I consider that the design as applied for and subsequently registered is substantially similar in overall impression to the design disclosed in the Suzhou Fak brochure of April 2005. Although shown on the brochure in front perspective view only, the impression obtained from that angle permits the viewer to make a reasonable assessment not only of the side, but also of the front, of the vacuum cleaner. Assuming, as I do, that the product is symmetrical, I take it that the other front perspective view would convey the same impression. Further, the item is displayed on the brochure in such a way as to permit the viewer to gain a reasonably good impression of the appearance of the product from the top. The only faces of the product which it is impossible to perceive from the brochure are those of the rear and of the underside. Notwithstanding these omissions, I consider that the vacuum cleaner is sufficiently represented on the Suzhou Fak brochure to give a good impression of the appearance of the design of the product as a whole, as required by s 19(3) of the Designs Act. Taking that approach, I find that the design for which the applicant applied for, and subsequently secured, registration is substantially similar in overall impression to that which appeared on the printed brochure for the MC-801 vacuum cleaner distributed at the Canton Fair in April 2005. The latter was a design published in a document outside Australia and was, accordingly, part of the prior art base for the purposes of registrability.

62 The respondent relies also upon the publication of a representation of the MC-801 vacuum cleaner on its web site on 25 May 2005. That representation consisted of a colour photograph of the product taken directly from one of the representations set out on the Suzhou Fak brochure distributed at the Canton Fair. A paper copy of the photograph as it appeared on the web site is in evidence. I have compared that with the design contained in the applicant’s registration under the Designs Act, and I find, for the same reasons as expressed above, that the design as applied for was substantially similar in overall impression, having regard to the appearance of the design as a whole, to the design set out on the web site.

63 In relation to this publication on the web site, the applicant pleaded that it constituted a publication without the consent of the registered owner (the applicant), by another person (the respondent) who derived or obtained the design from the registered owner’s predecessor in title, and must therefore be disregarded by reason of s 17(1)(b) of the Designs Act. Since the design was obtained from Suzhou Fak, the questions which arise are whether the applicant was relevantly the registered owner, and if so, whether Suzhou Fak was its predecessor in title for the purposes of s 17(1)(b) of the Designs Act. I consider that both of these questions should be answered in the negative. By s 14(1)(a) of the Act, the registered owner of a "registered design at a particular time" is the person who, "at that time", is entered in the register as the registered owner of the design. The "particular time" to which s 17(1)(b) of the Designs Act refers is, I consider, the time when the design in question was published on the respondent’s web site (25 May 2005). At that time, there was no registered owner of the design. Necessarily, the applicant was not in the position of someone who, qua registered owner, could give consent. I do not consider that the respondent should be regarded as doing something "without the consent of the registered owner" when there was no such person in existence. As to the second question, I was not assisted by any submissions on the subject of what constituted a "predecessor in title". In the circumstances, I would think that the "title" to which s 17(1)(b) refers is the title arising from ownership of a design which is registered. A predecessor in title, in my opinion, is a person who was previously registered as the owner of the design in question. Manifestly, Suzhou Fak did not, in May 2005, qualify as a predecessor in title for the purposes of s 17(1)(b).

64 The respondent relies also upon Mr Jabbour having sent to Mr John Hardy (of Godfreys) the specifications for the MC-801 vacuum cleaner in late December 2004. Those specifications comprised a list of physical and technical characteristics, capacities etc of the vacuum cleaner, but included, adjacent to the list, a very small representation of the cleaner itself. The cleaner appears to be shown in front perspective view, although, because of the size of the representation, and the quality of the photocopy produced as an exhibit to Mr Jabbour’s affidavit, it is more difficult to discern the detail of the design there represented than in the case of the other representations with which I have dealt. However, applying the standard of a person who is familiar with the product to which the design relates, as I am instructed to do by s 19(4) of the Designs Act, I likewise conclude that the registered design is substantially similar in overall impression, having regard to the appearance of the design as a whole, to that which is shown, in a small representation, on the specifications sent by the applicant to Godfreys in December 2004. The design was, accordingly, published in a document within Australia, which forms part of the prior art base under s 15(2)(b) of the Designs Act.

65 The respondent relies also on a ‘jpeg’ file sent by the applicant to an advertising company on 31 May 2005. The file contained the artwork for the packaging in which the MC-101 was to be sold by Godfreys – as the ‘Genius 2200 bagless’ vacuum cleaner. The file, as represented in an exhibit tendered in court, shows the vacuum cleaner very clearly in front perspective view. Save for the colour and the attachment of a hose, it justifies the same conclusion as that which I reached above with respect to the Suzhou Fak brochure distributed at the Canton Fair in April 2005. I consider that, by the sending of this file to the advertising company, the applicant published the design in a document within Australia for the purposes of s 15(2)(b) of the Designs Act. The registered design is, I consider, substantially similar in overall impression, having regard to the appearance of the design as a whole, to that published on 31 May 2005 when the applicant sent the artwork to the advertising company.

66 The respondent relies also upon a Godfreys "mid year clearance" brochure in which the new ‘Genius 2200 bagless’ product was advertised. That brochure contains a representation which is very similar to those to which I have already referred, in front perspective view. I would express the same conclusion about this publication as I have in the case of the other publications of the design in documents in Australia. However, the only evidence as to when this brochure was printed was that stated on the foot of the brochure itself, i.e. "June 2005". I cannot, therefore, be satisfied that the publication occurred before the priority date for the applicant’s design as registered, 16 June 2005.

67 The respondent relies also upon the receipt of samples of the MC-801 vacuum cleaner by Godfreys in March 2004, and upon the subsequent examination and testing of those samples for the purpose of determining their commercial suitability. I take it that the respondent proposes that this constituted the "public use" of the design in Australia for the purposes of s 15(2)(a) of the Designs Act. I was not addressed on what constituted "public use" in this context, and I am not disposed to hold that the sending of samples for these purposes to Godfreys constituted such use. Furthermore, no example of the samples was put in evidence. Although it is implicit in the respondent’s case that I should regard it as self-evident that these samples were at least substantially similar in overall impression to the design that was later sought to be registered, the respondent made no attempt to make good that proposition by putting the actual item upon which it relied before the court. In the circumstances, I make no finding that these samples constituted part of the prior art for the purposes of s 15(2)(a) of the Designs Act.

68 The respondent relied also upon the fact that a sample of the MC-801 vacuum cleaner had been sent to the Queensland Department of Industrial Relations, for the purposes of obtaining a certificate of approval for an electrical article under the Electrical Safety Act. The certificate was issued in May 2005, and Mr Jabbour said that the process of approval would have taken about ten weeks. The respondent’s point is that the provision of a sample of the product constituted a public use of the design in Australia for the purposes of s 15(2)(a) of the Designs Act. As with the dispatch of samples to Godfreys, I am not persuaded that the provision of a single sample to a government department for the purposes of electrical safety certification constituted public use in the relevant sense. I would not, in the circumstances, hold that such a dispatch was part of the prior art base apropos the applicant’s application for registration of the relevant design.

69 However, there are several respects in which I have held that the registered design was not distinctive when compared with the prior art base as it existed before the priority date. For that reason, I find that the design was not a registrable design within the meaning of Division 1 of Part 4 of the Designs Act. The respondent has applied for revocation on that ground, and the applicant, while not consenting to revocation, has not resisted it. I can think of no reason why I should not exercise the court’s jurisdiction under s 93(3)(a) of the Designs Act and order that the registration of the design be revoked.

70 The respondent also submits that the applicant was not an "entitled person" when the design was first registered, and that the design should be revoked on that ground also, pursuant to s 93(3)(b) of the Designs Act. Although this was a submission made in the alternative, it was persisted in by the respondent, and I shall deal with it. The respondent’s point is that the applicant did not come within any of the categories of person entitled to be registered as the owner of the design under s 13(1) of the Designs Act. Because of the position which the applicant ultimately took on the matter of revocation, I have not had the assistance of submissions on its behalf with respect to its entitlement to be registered as the owner of the design. It is clear from the evidence that neither the applicant nor any person employed by, or contracted to, the applicant was the actual designer. That leaves, effectively, two possibilities under s 13(1) of the Designs Act: is the applicant a person who derived title to the design from the original designer, or from someone who employed, or contracted with, that designer, within the meaning of par (c); and was the applicant a person who would, on registration of the design, be entitled to have the exclusive rights in the design assigned to it, within the meaning of par (d)?

71 The respondent placed into evidence, but otherwise did not explain the significance of, a printed document on the letterhead of Suzhou Fak dated 8 June 2005. That document was headed "MC-801 inventor certification". The text of the document was as follows:

The document had Mr Ding’s name printed at the base, but it was not signed. It seems, however, to be common ground that the original designer of the MC-801 was a person in the employ of Suzhou Fak. That being so, Suzhou Fak would have been entitled to apply for registration under s 13(1)(b) of the Designs Act.

72 Did the applicant derive title to the design from Suzhou Fak? The only evidence which would, even arguably, sustain an affirmative answer to that question is the "design registration authorisation" sent by Suzhou Fak to the applicant on about 30 May 2005 (set out in par 28 above). That certificate authorised the applicant to "proceed" the registration of the MC-801 design, but made it clear that ownership of the design was to remain the property of Suzhou Fak. Whatever else may be said about that document, in my opinion it does not constitute any basis from which the applicant might have derived title to the design within the meaning of s 13(1)(c) of the Designs Act. At most, the document constitutes an authority to the applicant to register the design in the name of Suzhou Fak.

73 As to par (d) of s 13(1) of the Designs Act, had the design been registered in the name of the true owner (the designer or Suzhou Fak), I can see no basis upon which the applicant would have been entitled to insist upon an assignment of those design rights to itself. There was certainly no contractual or like obligation imposed upon the designer or Suzhou Fak to make any such assignment.

74 In the circumstances, had it not been for my decision to revoke the design under par (a) of s 93(3) of the Designs Act, I would also have held the ground of revocation with which par (b) is concerned to have been made out, namely, that the original registered owner was not an entitled person in relation to the design when the design was first registered.

75 The applicant contends that a contract, as known to Australian law, came into existence on or about 10 January 2005 when Mr Ding provided to Mr Tseng (relevantly, the applicant’s agent) the exclusive distribution certificate to which I have referred in par 15 above. The respondent denies that there was any such contract. It contends that the certificate was merely an appointment – the unilateral act of Suzhou Fak, for which the applicant provided no consideration.

76 There is a question whether Australian law or Chinese law should be applied in the determination of whether the events of 10 January 2005 gave rise to a contract at all. Whether such a determination should be made under the lex fori, under the proper law of the putative contract or under the law of the place where the putative contract would come into existence (if there were one) appears to be the subject of some uncertainty: see Nygh, PE, and Davies, M, Conflict of Laws in Australia, 7^thed, 2002, pp 372-374. As Nygh and Davies point out, in Oceanic Sun Line Special Shipping Company Inc v Fay [1988] HCA 32; (1988) 165 CLR 197, Brennan J (at 225) and Gaudron J (at 260-261) expressed the view that the determination should be made under the lex fori. Deane J, however, considered that it should be made under the lex loci contractus (at 255). Wilson and Toohey JJ did not refer to the matter as such, but proceeded to determine the question whether there was a contract, a course which was open to them either on the basis that the lex fori applied or on the basis that the lex loci contractus applied.

77 In the present case, there was no evidence of Chinese law. The applicant approached the problem by making two propositions: first, that the determination of whether the events of 10 January 2005 gave rise to a contract should proceed under the proper law of the putative contract, and secondly, that, in the absence of evidence of foreign law, there is a presumption that that law is the same as the law of the forum (Nygh and Davies, pp 325-327). The applicant thus approached the question of whether a contract came into existence on or about 10 January 2005 as though the only relevant law were that of Australia. The respondent did likewise: indeed, the respondent made no point of the potentially difficult issues of private international law to which I have referred.

78 In the circumstances, the safest course for me to adopt is to fall into line with the explicit or silent propositions upon which both parties have conducted their cases, namely, that the question whether there was a contract between the applicant and Suzhou Fak is to be decided by a conventional application of Australian contract law.

79 The applicant’s case is that the contract on which it relies was made on or about 10 January 2005, and that it was partly in writing and partly to be implied. The written part is said to be the exclusive distribution certificate. The implied part is said to arise in order to give business efficacy to the written part. Neither as pleaded nor as proved in evidence is any conversation said to constitute part of, or evidence of an oral term in, the contract alleged. In this respect it is important to note that Mr Jabbour, the only representative of the applicant who gave evidence, had never spoken to Mr Ding before 10 January 2005. There was, therefore, no admissible evidence (save for the emails to which I have referred earlier in these reasons and which were admitted as business records) of anything which Mr Ding had said, to that date, about his company’s intended relations with the applicant. Neither was there any such evidence (save also for those emails) of anything that Mr Tseng said to Mr Ding. The result – which is consistent with the applicant’s pleading – is that the central question is whether the exclusive distribution certificate itself constitutes, or evidences, a contract between the applicant and Suzhou Fak.

80 Mr Panna argued that the exclusive distribution certificate involved both a positive promise by Suzhou Fak that the applicant would be its only distributor of the MC-801 vacuum cleaner in Australia and New Zealand, and a negative promise by that company not to sell the cleaner to any other person for resale in either such country. As a matter of construction, I agree that the positive – which appears expressly in the certificate – necessarily implies the negative. I also agree that the certificate should be read as conveying a promise by Suzhou Fak in those terms. I am not dissuaded from that conclusion by the mere use of the word "authorize" in place of some more conventional contractual term, such as "agree".

81 Insofar as the certificate sets out what it describes as "terms and conditions", it would constitute evidence of the terms of subsequent contracts under which vacuum cleaners were supplied in accordance with confirmed orders from time to time. Those contracts would be contracts for the sale of goods. However, no such contract existed on 10 January 2005.

82 The question is whether, as at 10 January 2005, the applicant had done anything, or had made any promise, which amounted to consideration for Suzhou Fak’s promise contained in the exclusive distribution certificate. As to the former, there is no suggestion that anything relevant had been done by that date. As to the latter, Mr Panna submitted that the applicant’s implied promise was "to accept the responsibility to place orders", but he accepted that such a promise lacked "content in terms of a quantity". In other words, it was put that the applicant’s promise was to place orders for the MC-801 at times, and in quantities, as to which there was neither a mutual consensus nor a commitment on the part of the applicant. When seen in this way, it appears to me impossible, however much one strives to give commercial efficacy to the arrangements between the applicant and Suzhou Fak, to give content to any promise by the applicant, such that one could identify some subsequent act or omission of the applicant which would amount to a breach of such a promise: see, analogously, British Empire Films Pty Ltd v Oxford Theatres Pty Ltd [1943] VLR 163.

83 Mr Panna also submitted that, in order for the vacuum cleaner to be distributable in Australia, it had to go through various tests and secure various approvals. He said that the applicant did these things, and incurred expense in doing to. He submitted that this was part of the consideration provided by the applicant for Suzhou Fak’s promise of exclusivity in the matter of distribution. None of this had been done by 10 January 2005, however. To put Mr Panna’s case in this respect at its highest, I suppose that it involves the proposition that the events of that date or thereabouts included an implicit promise by the applicant to take these steps and to do anything else that was necessary to bring the vacuum cleaner on to the market in Australia. There was, of course, no such promise expressly. I do not consider that there was any need to imply such a promise moving from the applicant to Suzhou Fak. The latter was interested only in purchases made by the applicant. As the proposed terms and conditions made clear, Suzhou Fak would be paid in full for its vacuum cleaners before delivery on board at Shanghai. Since no promise by the applicant to sell the vacuum cleaners in Australia may be implied, neither should any promise be implied that the applicant would obtain the necessary approvals for such sales. If there were regulatory or other matters that had to be attended to in order to make the cleaners marketable in Australia, that was, it seems to me, entirely the applicant’s concern, and should not be regarded as consideration for Suzhou Fak’s promise.

84 In the course of argument, I suggested to Mr Panna that the exclusive distribution certificate might be regarded as an agreed record of terms and conditions which would apply to future dealings in the course of trade between the applicant and Suzhou Fak, but which may not be a contract in itself. He said that, if so, Suzhou Fak’s promise about exclusivity would be meaningless. It would mean nothing, he submitted, in the context of a single order only, to say that Suzhou Fak would not supply to some other Australian wholesaler. I agree with the latter way of putting it, but I do not accept that, in those circumstances, the promise would be meaningless. Undoubtedly the promise was calculated to attract the applicant into doing business with Suzhou Fak. I am prepared to infer that, had the promise not been made, the applicant would have proceeded no further with negotiations to purchase vacuum cleaners from Suzhou Fak. However, the stepwise giving of indications, even forming promises which might eventually be enforceable, as to benefits which one party might accord to the other is not uncommon in commercial negotiations: it does not mean that, at every point at which such an indication is given, the maker is immediately bound by a contractual term to the effect indicated.

85 I would also reject the submission that the exclusivity promise was meaningless unless it formed the basis of a contract formed on 10 January 2005 or thereabouts, for the reason that subsequent events may well then (i.e. subsequently) have given the promise contractual significance. It may be that, in the immediate aftermath of the applicant having taken delivery of a substantial shipment of vacuum cleaners, for Suzhou Fak to have supplied someone else would have been regarded by the law as depriving the applicant of the benefit of the contract constituted by the order in question (in which, I take it, the terms of 10 January 2005 would be incorporated). There might be implied a term that Suzhou Fak’s promise of exclusivity would operate contractually for a reasonable period after the purchase of each particular shipment. However, none of these possibilities represented the way the contract was pleaded or argued on behalf of the applicant. It was consistently put that the contract came into existence on 10 January 2005, and was constituted by the exclusive distribution certificate as such.

86 That there was, on or about 10 January 2005, a contract containing the exclusivity term was an element of the applicant’s case. For the reasons set out above, I am not persuaded that there was.

87 I should add only two things on this subject. First, I have been obliged to determine this point without the assistance of representation on behalf of the other party to the putative contract, Suzhou Fak. Although courts will strive to give effective legal definition to something which manifestly has a real commercial purpose and is based in consensus, the context in which such issues are commonly decided is that in which one of the parties directly involved is attempting to deny the existence of a claimed contractual obligation towards the other party directly involved. The present is not such a case. It is a case in which one party has obtained a commitment of sorts from a third party not involved in the litigation, and seeks to give that commitment contractual status so as to restrict what would otherwise be the legitimate commercial efforts of the other party to the litigation. And it does so without either joining the third party or calling any evidence from the third party. Whatever I decided on the matter of a contract between the applicant and Suzhou Fak would not be binding on the latter; nor, it seems to me, on the applicant in later proceedings involving only Suzhou Fak. In these circumstances, I find the case for striving to give contractual efficacy to Suzhou Fak’s certificate of 10 January 2005 somewhat less compelling than it otherwise might have been.

88 Secondly, lest it is not already clear, I should state that this is not a case in which Suzhou Fak had a branded product which it wished to market in Australia. The MC-801 vacuum cleaner was a generic item which was sold ex-works, as it were, and was branded by the distributor, retailer, etc. In the present case, the MC-801 was sold as "Genius" by Godfreys as supplied by the applicant, and as "Onix" by Woolworths as supplied by the respondent. The applicant was not required to do, and did not do, anything to establish the name or brand of Suzhou Fak in Australia. I mention this in case it might be thought that part of the contemplated consideration moving from the applicant was the initial establishment of a market presence in Australia for a branded product.

89 Ms Gatford (who appeared for the respondent) also argued on behalf of the respondent that, even if the exclusive distribution certificate dated 10 January 2005 did constitute a contract as contended for by the applicant, that contract never came into effect, because the certificate was not signed. It will be recalled that the certificate was expressed to be "effective from the date this certificate is signed". Mr Panna submitted that the certificate was "stamped with the stamp of the company" and that that was sufficient. He submitted that the placement of a corporate stamp would be sufficient under Australian law as evidence of the agreement of the company to the commencement of the certificate. If by that submission Mr Panna intended to contend that a document would be sufficiently executed by a company registered in Australia if the common seal appeared thereon, but without the fixing of the seal having been witnessed by a director or other officer of the company, I would have to say that the contention derives no support from s 127 of the Corporations Act 2001 (Cth). That section is, of course, facultative: if Suzhou Fak had been an Australian registered company, the question would still remain whether the impression of a stamp on the exclusive distribution certificate would be regarded as a signing by the company under the general law. Since it is not an Australian registered company, it is to the general principles of the law that I must turn in any event for the resolution of this question.

90 In the case of an individual, a document will be "signed" if he or she either writes his or her name thereon, or makes an appropriate personal mark: R v Moore (1884) 10 VLR 322. Unless the provision in question requires the document to be signed "personally" or "in person", or the like (as to which see Motel Marine Pty Ltd v IAC (Finance) Pty Ltd [1964] HCA 7; (1964) 110 CLR 9), signing by an agent (with authority) will be treated as a sufficient signing by the person required to sign: Muirhead v Commonwealth Bank of Australia (1996) 139 ALR 561, 565-567. The same applies where the person required to sign is a company: McRae v Coulton (1986) 7 NSWLR 644, 663-664.

91 However, in the present case, there is no evidence about the placement of the stamp on the exclusive distribution certificate. Assuming for the moment that the Chinese characters on the stamp state the name of Suzhou Fak, the court does not know whether the stamp was placed on the document by an officer, employee or agent of Suzhou Fak having authority in such matters. That omission, which may appear pedantic to some, looks to be rather less so in the light of the circumstance that the original of the document was not in evidence, and that there were two photocopies (or perhaps facsimiles) of the document tendered in evidence, on each of which the stamp appeared in a slightly different place. On neither representation of the document was there any signature, printed name or initials within proximity of the impression of the stamp.

92 The question whether a document should be regarded as having been "signed" by or with the authority of a company where all that appears is the impression of a stamp thereon indicating the name of the company appears not to have been considered by an Australian court. Indeed, it appears not to have been decided in England, but the matter is the subject of an obiter dictum of Denning LJ in Lazarus Estates Limited v Beasley [1956] 1 QB 702, 710:

93 I should add that the representation of the signature in Goodman v J. Eban Ltd [1954] 1 QB 550 was established to have been affixed to the document in question by the person required to sign: there was no deficiency of evidence on the matter of authority. Lazarus Estates was, at least in the view of Denning LJ, in a different category. So, in my opinion, is the present matter.

94 The observations of Denning LJ in Lazarus Estates, while acknowledged to be obiter, were treated as of "great persuasive weight" by Sansoni J, giving the judgment of the Supreme Court of Ceylon, in Meyappan v Manchanayake (1961) 62 NLR 529, 532. There, save that the body concerned was a partnership rather than a company, the court was concerned with the very point which is before me. The question was whether a cheque, upon the reverse of which had been placed a stamp of the name of the firm, had been signed by the firm. Sansoni J said (at 532):

His Honour added (at 533) that the plaintiffs in the case before the Supreme Court had in effect asked the court "to extend the meaning of the word ‘signed’ to a limit which has never yet been reached...in any decided case". Like his Honour, I have neither been referred to, nor found by my own research, any decided case in which it has been held that the mere stamp of the name of a company, without any accompanying notation of witnessing or the like, and without any evidence as to the authority with which the stamp was used, amounts to the signature of the company or that a document so stamped should be regarded as having been signed by the company.

95 Meyappan was referred to by McPherson JA in the Queensland Court of Appeal in Muirhead. His Honour expressed the opinion that the Ceylonese court had declined to follow the majority in Goodman, an opinion in which, with respect, I am unable to join. However that may be, McPherson J recognised that the critical point in Meyappan was the absence of verification (139 ALR at 566). He distinguished the case from the facts with which he was concerned in Muirhead on that basis. His Honour did not decide "whether...the decision should be followed in Australia." For my own part, I cannot see why it should not be, at least (as here) where the only question is the simple one whether a document having the characteristics to which I referred in the last sentence of the previous paragraph of these reasons should be regarded as having been "signed" by the company in question. I accept, of course, that a particular statutory context might, in an appropriate case, point to a different conclusion.

96 What I have said above is based on the assumption that the Chinese stamp which appears on the exclusive distribution certificate of 10 January 2005 is the stamp of Suzhou Fak stating the name of that company. As a matter of evidence that assumption has not been made good. As I said, the court knows nothing about the meaning or significance of the characters on the stamp.

97 For the foregoing reasons, I cannot find as a fact that the exclusive distribution certificate was signed by Suzhou Fak. It follows that the applicant has not established that the authorisation to which it refers ever came into effect, and that, if there were a contract of the kind for which the applicant contends, it ever commenced to operate.

98 Finally with regard to the contract, Ms Gatford argued that, if there were a contract and it had effective operation, it was validly terminated by Suzhou Fak stating its willingness to do business with the respondent. She relied particularly on Mr Ding’s email of 27 May 2005 to Mr Stergiotis stating that the applicant had asked for the exclusive rights to the MC-801, but "at last, I didn’t give them the exclusivity due to their order qty annually." However, no amount of communication between Mr Ding and Mr Stergiotis would be effective lawfully to terminate a contract between Suzhou Fak and the applicant. At most, such communication might be evidence – although it is hard to see how it could be the complete evidence – of Suzhou Fak breaching such a contract or terminating it unlawfully. As Mr Panna submitted, there was no evidence that any contract existing as between Suzhou Fak and the applicant was ever lawfully terminated.

99 For a number of reasons – not the least of which is the unsatisfactory nature of having to decide on the existence and terms of a contract (or of an effective contract) without the assistance of one of the contracting parties – I do not propose to rest my judgment regarding the applicant’s common law cause of action on the absence of a contract alone. I shall now consider the case on the assumption that there was a contract of the kind for which the applicant contended. Relevantly, the applicant’s proposition was that such a contract provided that Suzhou Fak would not supply the MC-801 vacuum cleaner to any other wholesaler in Australia or New Zealand for resale there, and that such a contract was terminable by notice given at any time by Suzhou Fak. Mr Panna accepted that such notice did not have to be of any particular length – the termination might, at the option of Suzhou Fak, operate instanter upon the giving of the notice. However, he submitted, until such notice was given (and none had been given on the facts of the case), Suzhou Fak remained bound by the negative covenant in the contract.

100 This brings me to the question whether the respondent induced Suzhou Fak to break its assumed contract with the applicant; that is, whether it induced Suzhou Fak to supply the MC-801 vacuum cleaner to the respondent for sale in Australia, contrary to that assumed contract. Whether described – as traditionally – as inducement to breach of contract or – as more recently – as interference in the performance of a contract, the tort on which the applicant sues has three elements – the act, the intent, and the resulting damage: Emerald Construction Co Ltd v Lowthian [1966] 1 WLR 691, 703 per Diplock LJ. In the present case, the conduct of the respondent of which the applicant complains took place over the period from April 2005 until January 2006. However, the evidence shows that, over that period, the respondent’s conduct did not constitute a continuous engagement of, or dealing with, Suzhou Fak in the manner of a single protracted transaction standing as the "act" to which Diplock LJ referred. Rather, there were three discrete occasions (and a possible fourth), upon which the respondent either had or sought to have dealings with Suzhou Fak and which need to be considered in the context of this tort. I shall consider each in turn.

101 First, at the Canton Fair in April 2006 the respondent was given to understand that the MC-801 was available for sale to Australia. At that time, the respondent had no knowledge of any exclusivity arrangement (much less contract) between Suzhou Fak and some other party. Mr Stergiotis’s request for information and samples in early May cannot, therefore, be seen as an attempt to induce a breach of contract. It was only in response to that request that Mr Ding first informed Mr Stergiotis that another company had the exclusive rights to the Australian market. I would regard Mr Stergiotis’s email of 16 May 2005 as an attempt to procure Mr Ding to supply the vacuum cleaner to the respondent notwithstanding whatever other exclusive arrangement he had. However, since Suzhou Fak held its line, nothing came of that attempt. It is unnecessary at this point to investigate whether Mr Stergiotis’s attempt had the character of an attempt to induce a breach of contract, or whether there was the necessary intent, since no damage was suffered by the applicant. Mr Ding’s email of 27 May 2005 was the final communication in what I perceive to be the first round of transactions which may be relevant to the establishment of the tort, the respondent apparently deciding not to press the matter further at that stage.

102 Secondly, in July 2005, Mr Mahtani, acting on behalf of the respondent, sought quotations for, and samples of, the MC-801. Again, Suzhou Fak refused. Mr Ding said that the Australian market was "whole closed". Although there is indirect, and fairly unsatisfactory, evidence that Cuori (presumably on behalf of the respondent) attempted to place an order for five containers of the product in August 2005, once again this approach was rejected by Suzhou Fak. To this point, therefore, there had been no effective inducement of Suzhou Fak to breach its assumed contract with the applicant. Indeed, the proof of both the acts and the intentions of the respondent apropos this series of transactions has been equivocal, to say the least. I do not think it has been shown that the transactions had any of the characteristics of the tort on which the applicant sues. For this reason I would describe this as the "possible fourth" occasion which may be relevant.

103 Thirdly, the subject arose again when Mr Stergiotis and Mr Mahtani visited the Suzhou Fak booth at the Canton Fair in October 2005. At the fair itself, Mr Stergiotis indicated to Mr Ding his preference for the MC-801 over the MC-802. He asked Mr Ding whether he would sell the MC-801 to the respondent. I do not consider that I should regard this as an inducement or procurement of Suzhou Fak to act in contravention of whatever exclusivity arrangement it had with the applicant. Mr Stergiotis asked a question – he did not seek to persuade. Although I accept that he then knew that the applicant did have the exclusive rights for Australia, his question should not be construed as going any further than enquiring whether that position still obtained. For all he knew, Suzhou Fak might have terminated its arrangement with the applicant or had some other change in its arrangements. Mr Stergiotis did not, at the fair, seek to persuade Mr Ding from the position which he had previously taken on more than one occasion, namely, that the MC-801 would not be supplied to the respondent.

104 Without further persuasion by Mr Stergiotis or Mr Mahtani, Mr Ding changed his mind, and offered the MC-801 to the respondent. On the assumptions upon which I am now working, Suzhou Fak thereupon breached its contract with the applicant. Without further inquiry, Mr Stergiotis did business with Suzhou Fak. The respondent placed a substantial order for vacuum cleaners to be sold into Australia. However, Suzhou Fak’s involvement in that transaction was not the result of any persuasion by the respondent. The respondent was, at the highest, in the position of a willing participant in a transaction which, of itself, caused Suzhou Fak to be in breach of its assumed contract with the applicant. This gives rise, I consider, to the following questions: (1) does such participation qualify as an "act" of inducement in the sense of the first of the three elements outlined by Diplock LJ; and (2) by so participating, did the respondent have the necessary intent in the sense of the second of those elements?

105 It seems that an affirmative answer should be given to the first question, at least by a Judge of this court sitting at first instance. Although not strictly necessary for the decision which the English Court of Appeal reached in D C Thomson & Co Ltd v Deakin [1952] Ch 646, 694, the following reasoning of Jenkins LJ has been often referred to:

Of the authorities to which his Lordship referred in support of that proposition, it is difficult, in my respectful view, to regard British Motor Trade Association v Salvadori [1949] Ch 556 as an instance of no more than inconsistent dealings. There the defendants operated a scheme, using dummy buyers, consciously designed to undermine the plaintiffs’ policy of requiring those who bought motor cars from them not to re-sell them within 12 months. The whole point of the scheme was that the dummy buyers would breach their contracts with the plaintiffs by re-selling to the defendants. The other authority to which Jenkins LJ referred was British Industrial Plastics Ltd v Ferguson [1940] 1 All ER 479. As his Lordship pointed out, that case was decided on the factual point that the defendant did not have actual or constructive knowledge that the disclosure to them of a particular process by a former employee of the plaintiffs was wrongful as being in breach of contract. Lord Russell, who made the main speech in the case, treated the plaintiffs’ claim as "based on an allegation that [the defendants] wrongfully and maliciously induced and procured the defendant ... to commit breaches of his agreement of service ..." (at 481) and his Lordship said that that allegation, if established, would disclose a good cause of action. It is, with respect, difficult to see how this judgment of the House of Lords is authority for the proposition that mere inconsistent dealings constitutes an act sufficient (together with intent and damages) to make good the cause of action with which I am concerned.

106 Stronger support for the "inconsistent dealings" proposition, I consider, derives from De Francesco v Barnum (1890) 63 LT 514 (which is a different judgment from De Francesco v Barnum (1890) 45 Ch D 430). There the defendant engaged two girls as dancers, unaware at that time that they were contracted to perform for the plaintiff. Because of the latter circumstance, the defendant was not liable for inducement to breach at the point of engagement. However, he was later informed of the contracts between the girls and the plaintiff, but continued to engage them nonetheless. Fry LJ (sitting as an Additional Judge in the Chancery Division) said (63 LT at 515):

This was one of the judgments to which Jenkins LJ referred (although mistakenly footnoted as the other judgment by the same name to which I have referred). If De Francesco v Barnum is good law, it would seem to follow that the tort may be complete, given always the elements of intent and damage, where the putative wrongdoer does not take any positive act or initiative, but merely carries on some course of dealing known by him to be inconsistent with a contract by which the other party with whom he or she is dealing is bound.

107 I mention, finally in this respect, the judgment of the Full Court in Allstate Life Insurance Co v Australian and New Zealand Banking Group Ltd (1995) 58 FCR 26. Giving a judgment with which the other members of the court agreed, Lindgren J set out the passage from the judgment of Jenkins LJ in Thomson v Deakin as though it stated the law: 58 FCR at 44. It is true that his Honour was not dealing with the point as to "inconsistent dealings" with which I am concerned, but, where the Full Court relies upon a statement of the law in the course of deciding a case before it, I should, sitting as a single Judge, treat that statement as correct.

108 Turning to the intent of the respondent apropos the events of October 2005, manifestly the respondent intended that Suzhou Fak should supply it with vacuum cleaners for re-sale in Australia. Mr Panna submitted that, against the respondent’s knowledge – obtained in May 2005 – that the applicant had the exclusive distribution rights for Australia, the respondent must be taken as having intended a breach of whatever contract existed under which those rights arose, or at least as having been "recklessly indifferent" to the existence and terms of any such contract.

109 As to "reckless indifference", the authorities, in my view, go no further than to say that a third party who, with knowledge of a contract which is binding upon the other party with whom he or she does business, induces that other party to do an act which is known to be inconsistent with that contract (or knowingly interferes with the performance of the contract by that party), will have acted unlawfully if he or she intended that the contract be brought to an end by breach if it could not be brought to an end in accordance with its terms. In Emerald Construction Lord Denning MR said ([1966] 1 WLR at 700-701):

110 In Allstate, Lindgren J referred to the different ways in which the Master of the Rolls and Diplock LJ had expressed themselves in this respect, and held that, where it was alleged that the terms of the provision being breached were known, the aspect of reckless indifference did not arise (58 FCR at 44). His Honour did not, therefore, need to resolve the difference. In my view, crucial to the comments of both members of the Court of Appeal in Emerald Construction was the fact in that case that the defendants did not merely seek to induce the party to the contract to do an act without any thought as to whether that act would constitute a breach of contract: their primary purpose was to have the contract terminated. This is reflected in each of the passages set out above. I do not think the same line of reasoning inevitably applies to a situation where the focus of the defendant is not upon the contract as such, but where his or her dealings with the party to the contract have the effect, even the incidental effect, of bringing that party into breach of the contract. In that context, to equate indifference, even "reckless" indifference, with intention would, I consider, be to denude the latter concept of any meaningful connotation.

111 In the present case, on the assumed contract between the applicant and Suzhou Fak, there was a means by which the contract could lawfully be terminated in circumstances which would be no less efficacious commercially for the respondent than termination by breach. Suzhou Fak could have terminated the contract by notice, operating instanter. Although Mr Stergiotis did not know of such a means of termination, neither did he have any reason to assume a contrary contractual state of affairs. He may well have been indifferent – even "recklessly" so – about the means by which the contract could be terminated, but it seems to me to be unreal to impute on him – contrary to the fact – an intention that Suzhou Fak should breach its contract with the applicant on no basis other than that indifference when in fact Suzhou Fak did have at its disposal means by which it could do business with the respondent which did not involve a breach of contract.

112 The approach which I have taken is, I consider, in line with Sanders v Snell [1998] HCA 64; (1998) 196 CLR 329. There, the Minister for Tourism of Norfolk Island had directed the Tourist Bureau to take steps to terminate the employment of its Executive Officer "at the earliest practicable date". The Bureau did terminate the employment of the Executive Officer and did so in circumstances which amounted to a breach of contact. It was held, however, that the Minister had not induced the breach: the employment might well have been terminated lawfully (i.e. on proper notice), and the Minister should not have imputed to him an intention that his direction should be carried out by unlawful means. Gleeson CJ, Gaudron, Kirby and Hayne JJ said (at [26]):

113 Returning to the present case, I find that, in October 2005, the respondent (effectively Mr Stergiotis) did not intend that Suzhou Fak should break such contract as it may have had with the applicant. Mr Stergiotis regarded the arrangements as between Suzhou Fak and the applicant as their business, not his. He would have preferred that those arrangements did not prevent Suzhou Fak from dealing with the respondent. He told Mr Ding so. But he did not turn his mind to the legal nature – or the terms – of whatever existed between Suzhou Fak and the applicant. When Mr Ding, having had a change of heart, offered to do business with Mr Stergiotis, the latter readily embraced the idea, as Mr Ding knew he would. But he did not thereby intend a breach of contract on the part of Suzhou Fak. And, there being (under the assumed contract) a perfectly lawful way for Suzhou Fak to have brought the contract to an end summarily, Mr Stergiotis should not, merely by what might be described as his indifference, be fixed with such an intention.

114 Fourthly, there are the events of January 2006. After the respondent placed its substantial order in October 2005, Suzhou Fak filled that order, and the vacuum cleaners in question sold very well. The respondent had every reason to believe that business would continue along those lines, and no reason to suspect that Suzhou Fak had breached a contract with the applicant by accepting the first order.

115 It was only in January 2006 that, prompted by the applicant, Mr Ding changed his mind again. He then refused to fill a second substantial order which Cuori, on behalf of the respondent, had placed. There is no doubt but that, on this occasion, the respondent made every effort to induce Suzhou Fak to fill that order, and if it had done so, it would have been a breach of the contract between Suzhou Fak and the applicant, the existence of which I assume for present purposes. It seems that the respondent had agreed terms with Mr Ding under which Suzhou Fak would supply the respondent with a further shipment of MC-801 vacuum cleaners, but the arrival of the applicant’s letter of demand caused the respondent to withdraw. The position ultimately reached was that it did not induce Suzhou Fak to breach its assumed contract with the applicant.

116 Although it seems as though the battle lines were well and truly drawn in January 2006, even then there was no explicit statement by the applicant, or by Suzhou Fak, to the respondent that there was a contract between the two former parties which would be breached if Suzhou Fak supplied the respondent. It was not until 20 January that the respondent was informed of the difficulty involving the applicant’s exclusive rights. In his email of that day, Mr Ding referred to the applicant applying for "their certificate in May 2005". That, I infer from the date, was some kind of reference to the then proposed design registration. Mr Tseng’s email to Mr Ding of 23 January, which was sent to the respondent, did not refer to a contract. Neither did Mr Ding’s covering email. Mr Stergiotis’s reply is perhaps indicative of his then state of understanding: he said that he had seen no evidence of a "certified patent under Australian law".

117 When the applicant’s solicitors wrote their letter of demand on 23 January 2006, they referred therein to the design registration, and to the Trade Practices Act, but made no reference to the common law cause of action on which the applicant now relies. Even when the lawyers became involved, therefore, the proposition that the respondent’s conduct was such as to induce Suzhou Fak to breach a contract which it had with the applicant was not, apparently, obvious. Indeed, when this proceeding was commenced (in the Federal Magistrates Court) on 18 April 2006, the common law cause of action was not relied on. It was introduced by amendment only on 6 November 2006. None of these considerations would, of course, be conclusive against the applicant if the respondent’s intent to induce Suzhou Fak to breach its contract with the applicant in January 2006 was otherwise established. However, it has not been. Even when put on notice of the applicant’s rights, the respondent was not squarely told that those rights arose under contract. Neither should I find that it ought to have been obvious to someone in the position of the respondent in January 2006 that, if there were any such rights, they would necessarily have been the creature of a contract of some kind. They need not have been. Had the design registration been valid, that might well, in the reasonable eyes of the respondent at the time, have provided a legal basis for the rights which the applicant asserted. It is in this context that I refer to the applicant’s solicitors’ letter of demand, and to the subsequent progress of the pleadings in the case: the exertions of the applicant’s own legal advisers do not provide support for the proposition that the inducement to breach of contract thesis ought to have been obvious to the respondent in January 2006.

118 As at January 2006, the respondent had been doing business with Suzhou Fak which it had no reason to suspect might involve Suzhou Fak in a breach of contract. Within the course of about a week in that month, it was presented with a volte face by Mr Ding, based upon assertions by the applicant which, while clear enough in their commercial purpose, were less than wholly unambiguous in their jurisprudential basis. Unsurprisingly, the respondent protested. It had an important customer whose order it had accepted. When, at the end of the week, it received the applicant’s letter of demand, it desisted from all further attempts to do business with Suzhou Fak. I cannot find, in these events, any intention on the part of the respondent to induce a breach of contract by Suzhou Fak. Moreover, since no business was (at that time) in fact done with Suzhou Fak, no breach of contract was in fact induced. No damage was done to the applicant. The tort of inducement was not committed at that time.

119 I shall not leave this part of my reasons without reference to Delphic Wholesalers Pty Ltd v Elco Food Co Pty Ltd (1987) 8 IPR 545. Mr Panna relied particularly on the judgment of McGarvie J in that matter, involving as it did facts which have a degree of resemblance to those of the present case. The case concerned olive oil manufactured in Greece and imported into Australia, and sold there, under the brand "Diana". The Greek manufacturer had an agreement with the plaintiff, Delphic, for the exclusive distribution of the oil in Australia. That agreement, which was in writing, could be terminated by the manufacturer only if Delphic failed to abide by any of the conditions of the agreement or ceased to carry on business. Not only did the defendant, Elco, seek to have the manufacturer supply the oil to it for sale in Australia: it pressed the manufacturer to appoint it the exclusive distributor for that market in place of Delphic. McGarvie J said of the managing director of Elco (8 IPR at 553-554):

Although McGarvie J held that the actions of Elco involved all the necessary elements of the tort of inducement to breach of contract, his Honour’s findings as set out in that passage make it clear how far removed the present case is from the matter with which his Honour dealt. In the case of a branded product, it is, I consider, more obvious that the distribution of the product into the Australian retail market should be handled by a single importer. However that may be, the fact was, in Delphic, that the manufacturer had a written agreement for the exclusive distribution of the olive oil by Delphic, which agreement could not be terminated at the whim of the manufacturer if, for example, the manufacturer were persuaded to change his distribution arrangements. The defendant Elco knew of that contract, and consciously set about persuading the manufacturer not only to supply olive oil to itself, but also to substitute itself for Delphic as "the" importer and distributor of the olive oil. With respect to almost every significant factual ingredient relevant to the tort, the findings which I have stated above place the present case apart from Delphic. Indeed, it might be said that Delphic is a clear demonstration of the kind of case which the present is not.

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:

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.

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:

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:

He was then asked whether the products would be sold "in the same colours or same features" and replied:

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:

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:

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:

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:

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:

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] HCA 10; (2003) 196 ALR 257, 266 (per Hayne J):

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.

158 For the above reasons, I propose to dismiss the application, to order the revocation of the applicant’s registered design and to award the respondent the sum of $213,059.96 by way of damages for the applicant’s unjustified threats of infringement proceedings.

I certify that the preceding one hundred and fifty-eight (158) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jessup.

Counsel for the Applicant:	A K Panna SC

Solicitor for the Applicant:	Herbert Geer & Rundle

Counsel for the Respondent:	S Gatford

Solicitor for the Respondent:	D Black

Date of Hearing:	13-15, 18-20 December 2006

Date of Judgment:	14 February 2007

Federal Court of Australia

World of Technologies (Aust) Pty Ltd v Tempo (Aust) Pty Ltd [2007] FCA 114 (14 February 2007)