District Court New South Wales Medium Neutral Citation: CHEP AUSTRALIA LIMITED v P. J. NASH PTY LTD [2022] NSWDC 183 Hearing dates: 24 – 25 November 2021 and 23 February 2022; submissions to 1 March 2022 Date of orders: 20 May 2022 Decision date: 20 May 2022 Jurisdiction: Civil Before: Gibson DCJ Decision: Order: (1) Judgment for the plaintiff, with liberty to the parties to bring in Short Minutes of Order reflecting the mathematically agreed judgment sum. (2) Cross-claim dismissed. (3) Costs and interest reserved, with liberty to apply. Legislation Cited: Australian Consumer Law (schedule 2 to the Competition and Consumer Act 2010 (Cth)) ss 21, 23, 24 and 25 Civil Liability Act 2002 (NSW) ss 5D and 5E Evidence Act 1995 (NSW) s 91 Fair Trading Act 1987 (NSW) ss 30(3) and 71(1) Cases Cited: ACCC v CLA Trading Pty Ltd [2016] FCA 377 ACCC v Quantum Housing Group Pty Ltd (2021) 388 ALR 577 Arab Bank Australia Ltd v Sayde Developments Pty Ltd (2016) 93 NSWLR 231 Brambles Holdings Ltd v Bathurst City Council (2001) NSWCA 61 Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 42 Cappello v Hammond & Simonds NSW Pty Ltd [2020] NSWSC 1021 CHEP Australia v Flynn [2019] NSWDC 614 CHEP v Bunnings [2010] NSWSC 301 Commonwealth Bank of Australia v Kojic (2016) 249 FCR 421 County Securities Pty Limited v Challenger Group Holdings Pty Limited & Anor [2008] NSWCA 193 County Securities Pty Limited v Challenger Group Holdings Pty Limited & Anor [2008] NSWCA 193 Defteros v Google Inc [2021] VSCA 167 Empirnall Holdings Pty Ltd v Machon Paull Partners Ltd (1988) 14 NSWLR 523 Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473 Fu Tian Fortune Pty Ltd v Park Cho Pty Ltd (2018) 19 BPR 39,031 Good Living Company Pty Ltd as Trustee for the Warren Duncan Trust no 3 v Kingsmede Pty Ltd [2021] FCAFC 33 In Hill End Gold Ltd v First Tiffany Resource Corporation [2011] NSWCA 276 Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 J-Corp Pty Ltd v Mladenis [2009] WASCA 157 McMahon v National Foods Milk Ltd (2009) 25 VR 251 Moran v Standard Oil Co 211 NY 187 Moratic Pty Ltd v Gordon (2007) 13 BPR 24,713 Mushroom Composters Pty Ltd v IS & DE Robertson Pty Ltd [2015] NSWCA 1 Olsson v Dyson (1969) 120 CLR 365; [1969] HCA 3 Ormwave Pty Ltd v Smith [2007] NSWCA 210 Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28; 258 CLR 525 Pavlovic v Universal Music Australia Pty Limited [2015] NSWCA 313 Pitcher v Langford (1991) 23 NSWLR 142 Unique International College Pty Ltd v ACCC (2018) 266 FCR 631 Upper Hunter County Council v Australian Chilling and Freezing Co Pty Ltd (1968) 118 CLR 429 Texts Cited: K R Handley in "Estoppel by Conduct and Election", (2nd ed, 2016), [8-001] Category: Principal judgment Parties: Plaintiff/cross-defendant: CHEP Australia Limited Defendant/cross-claimant: P. J. Nash Pty Ltd Representation: Counsel: Plaintiff/cross-defendant: Mr B Smith Defendant/cross-claimant: Mr J Bennett Solicitors: Plaintiff/cross-defendant: Law Squared Defendant/cross-claimant: Marsh & Maher Richmond Bennison Lawyers File Number(s): 2019/00268535 Judgment The parties and the claims 1. The plaintiff ("CHEP") is the largest pallet, crate and container hire business in the world. It supplies this equipment to its customers by use of a "transfer hire model", which enables customers to use and reuse pallets instead of purchasing and having to store their own equipment. In its annual report of 30 June 2021, this pallet and container system is described as "the invisible backbone of the global supply chain" because of the advantages it confers upon its customers in terms of efficient and sustainable packaging for transportation. Although no CHEP product is uniquely identifiable, its pallets clearly display the "CHEP" logo: CHEP v Bunnings [2010] NSWSC 301 at [5]. 2. The defendant ("PJ Nash") is a fruit wholesaler operating out of the Epping markets in Victoria. Mr Nash is the director of PJ Nash Pty Ltd. 3. As long ago as 18 January 1995, Mr and Mrs Dunn, directors of FW Westmore & Sons Pty Ltd made an application for commercial credit with Brambles Australia Pty Ltd, trading as CHEP Australia. They were allocated an account number. The identity of each of these contracting parties changed as the years went by (PJ Nash acquired the business of FW Westmore in about November 2005, and CHEP's business was transferred to it by its parent company in about May 2006), but the parties continued to trade with each other in essentially the same terms. In particular, PJ Nash continued to hire equipment from CHEP and to engage with third parties who are also customers of CHEP in relation to the transfer of pallets. 4. In a letter dated 14 June 2016, CHEP advised PJ Nash that they proposed new Terms of Hire to provide the basis for CHEP and all its customers (not just PJ Nash) to "share and reuse our standardised platforms in moving your goods through the supply chain" (CB 306). Clause 2 of the CHEP's 2016 Terms of Hire ("2016 Terms of Hire") provided that the hire of equipment was "subject to these terms" (CB 307). From that time onwards, PJ Nash continued to hire pallets from CHEP and to pay invoices received from them in the same way as before. Each of those invoices contained express references to the 2016 Terms of Hire and the details of those Terms were readily accessible to PJ Nash at any time. Mr Nash, in his evidence, acknowledged that it would have been open to the company to reject the new contractual terms and that the company did not do so (T 73). 5. Another aspect of the trading between the parties which also changed over this period was the increasing use of technology in terms of computerised record systems, portals for access to account details, electronic invoicing and email correspondence. The efficiencies in terms of record-keeping and communication engendered by these new methods of communication were the same or similar to other companies doing business at the time. This entailed companies such as PJ Nash keeping up with the changes to business methods caused by technology. As is set out in more detail below, this was an issue which, independent of any changes to the Terms of Hire in 2016, appears to have contributed to difficulties in terms of record-keeping, which difficulties are relevant to the circumstances in which the parties came into conflict. 6. For a variety of reasons, some of which were set out by Mr Nash in his evidence, the number of pallets recorded as being sent to PJ Nash began to rise. In about June 2018 Mr Valeri, employed by CHEP, had a conversation with a person named Milan (whom he understood worked on PJ Nash's finance team) about the increase. Following an exchange of correspondence, the rates were revised. There was further correspondence during 2018 and on most of these occasions Mr Valeri said to PJ Nash employees "You really need to follow up your trading partners as to any lost equipment" and/or "If you don't stay on top of your online transfers, your equipment will become out of control". 7. On occasion, Mr Valeri went to the PJ Nash premises. During one such visit, he was told by Milan and by another employee whom he knew only as Hayat that a large number of CHEP pallets allocated to the PJ Nash account had been sent to PJ Nash's trading partners. In accordance with clause 4(d) of the 2016 Terms of Hire, CHEP does not interfere with trading disputes of that nature, but to assist PJ Nash, Mr Valeri arranged for a Loss Investigation Report to be generated (Exhibit PV 1). 8. After negotiations between the parties about the increase in the number of pallets unaccounted for by PJ Nash, payments totalling $65,000 were allocated to the oldest outstanding invoices first. Mr Nash wrote a complaining email to Mr Valeri stating that CHEP "was actually assisting the problem" by not taking a tougher line with Aldi: "Again this is only me talking out loud but I feel like CHEP are assisting in the movement of hire equipment which others are paying for (in my eyes stolen property) because they are happy to hire equipment out but not take any responsibility for picking up extra hire equipment from accounts holders that potentially cannot justify why they have extra equipment. My issue is we don't have the money to pay the account out in one lump sum. Which to Perc's credit organised a payment plan for equipment we all knew wasn't in my possession which I was grateful for but herein lies the problem. We can pay $10k a week on a payment plan but we can't afford to pay the $9k a week hire charges on top of it because I'll never be able to get in front, it just becomes a double whammy. I thought that once the payment plan starts the hire charges stop because effectively the deal has been done and the only difference is you have allowed me to enter into payment [sic] plan. Now the problem is the account has been frozen and that doesn't allow me to trade which in turn doesn't allow me to generate the income to make the repayments. We all agree I've done the right thing not buying stolen pallets all [sic] the Aldi issues and so on which would be over a $1 mil [sic] dollars in extra costs. Surely $100k on a payment plan after overpaying over $1 mil [sic] is enough and we should be able to work together to resolve this. I am not asking not to pay but instead to pay on terms I can afford that is all." [Affidavit of Mr Valeri, paragraph 23] 1. There were further negotiations up until June 2019 and on 19 June 2019 an email was sent seeking confirmation that payment of $64,616.25 which was currently outstanding in relation to the agreement would be paid. There was no response and these proceedings were commenced. 2. The current amount outstanding is as follows: 1. Outstanding invoices: $103,413.51. 2. Ongoing hire charges: $202,169.88. 3. Compensation for loss pallets: $51,136.50. 4. Interest and ongoing hire charges accruing at $22.08 per day for the invoices and $244.03 per day for the ongoing higher charges. The issues in the proceedings 1. The issues arising from CHEP's claim are as follows: 1. Whether there is a contract between CHEP and PJ Nash and what its terms are. 2. If there is no contract between CHEP and PJ Nash, whether PJ Nash is estopped by convention from departing from a common assumption shared by the parties that CHEP hired equipment to PJ Nash on the basis of CHEP's Terms of Hire. 3. The nature and quantum of CHEP's claim. 4. Whether any of the amounts claimed by CHEP are unenforceable as contractual penalties either at common law or in equity. 5. Whether any of the terms of the contract between CHEP and PJ Nash are unfair contractual terms within the meaning of s 23 of the Australian Consumer Law. 6. Whether CHEP has engaged in unconscionable conduct within the meaning of s 21 of the Australian Consumer Law. 7. Whether CHEP has engaged in unconscionable conduct in equity. 8. Quantum of the claim. 1. The issues on the cross-claim are: 1. Did the Cross-Defendant issue invoices that contained charges that were: 1. Out of all proportion to the value of the equipment which had been hired? 2. Out of all proportion to any costs associated with the hire of the equipment; 3. In respect of equipment that the plaintiff knew was no longer in the possession of the original hirer; 4. In respect of equipment that had been returned to the plaintiff or hired to another customer; 5. As well as being the subject of charges levied on the account used by the defendant, we are simultaneously also the subject of charges levied on other customers; 6. Compounding, and in respect of which the plaintiff made no attempt to mitigate? 1. In issuing the invoices did the plaintiff: 1. Impose penalties in equity and at law; 2. Impose unfair terms in the meaning of section 23 the Australian Consumer Law; 3. Engage in unconscionable conduct within the meaning of section 21 the Australian Consumer Law, or equity (this latter claim was dropped in final submissions); 1. If the answer to any of the above is yes, are payments that have been made by the defendant to the plaintiff pursuant to previous invoices to sound in: 1. Restitution, including for moneys had and received; 2. Damages. The evidence 1. CHEP relied upon the following affidavit material: 1. Affidavit of Sandra Tadros sworn 29 June 2020 (CB 66-78) with Exhibit ST-1 (CB 140-693) (T 56-61) 2. Affidavit of David George Trussell sworn 12 November 2021 (CB 97-120) with Exhibit DT-1 (CB 962-1287) (T 29-32) 3. Affidavit of Pasquale Valeri sworn 12 November 2021 (CB 121-131) with Exhibit DT-1 (CB 1288-1324) (T 38-41) 4. Affidavit of Sandra Tadros sworn 12 November 2021 (CB 132-139) with Exhibit ST2 (CB 1325-1513) (T 61-62) 1. PJ Nash relied upon the following affidavit material: 1. Affidavit of Philip Nash sworn 5 November 2021 (CB 79-90) with Exhibit D1-D7 (CB 694-961) (T 74-75, 82, 83-94, 101-106) 2. Affidavit of Philip Nash sworn 22 November 2021 3. Affidavit of Roslyn Goss sworn 5 November 2021 (CB 91-96) (T 109 - 111) 1. Much of the evidence is documentary in nature by reason of the long history of the relationship between the parties. Contractual documentation between CHEP and PJ Nash 1. As PJ Nash denies that there was any contractual relationship between the parties and there is a long history of change of identity over almost a quarter of a century of dealing, the pleadings as to the contractual documents need to be set out with care. Mr Smith has helpfully summarised the pleadings (submissions, paragraphs 7 – 9) as follows. 2. CHEP asserts: 1. Brambles and FW Westmore entered into an agreement for the supply of equipment in accordance with Brambles' then applicable Terms of Hire on or about 18 January 1995 ("Brambles/FW Westmore Agreement"). 2. After the acquisition of FW Westmore's business by PJ Nash, Brambles and PJ Nash entered into an agreement in or about November 2005 ("Brambles/PJ Nash Agreement") pursuant to which Brambles agreed to supply equipment to PJ Nash in accordance with Brambles' then applicable Terms of Hire ("2000 Terms of Hire"). 3. In June-July 2006, the Brambles/PJ Nash Agreement was novated to CHEP ("CHEP/PJ Nash Agreement") and the terms of the CHEP/PJ Nash Agreement included CHEP's 2006 Terms of Hire ("2006 Terms of Hire"). 4. From 1 August 2016, the terms of the CHEP/PJ Nash Agreement (as foreshadowed in the 14 June 2016 letter to the defendant) were varied to include 2016 Terms of Hire. 1. PJ Nash's pleading asserts: 1. It does not admit the existence of the Brambles/FW Westmore Agreement. 2. It denies the existence of the Brambles/PJ Nash Agreement and alleges that the only agreement was the Brambles/FW Westmore Agreement. 3. It denies the novation of the Brambles/PJ Nash Agreement to CHEP on the basis that: 1. it required the express consent of FW Westmore; 2. PJ Nash has never been a party to the Brambles/FW Westmore Agreement so could not consent to its novation; and 3. even if PJ Nash was a party to the Brambles/PJ Nash Agreement, its express consent was required to validly novate the Brambles/PJ Nash Agreement to CHEP. 1. It denies the existence of the CHEP/PJ Nash Agreement and says that the terms of any agreement between CHEP and PJ Nash did not include the 2006 Terms of Hire or the 2016 Terms of Hire. 2. If there was any such contract, the court should not give relief where it is "highly unlikely" (submissions, paragraph 4(b)) that so many pallets were in the defendant's possession or by reason of unfair terms, penalties and unconscionable conduct. 1. What this effectively means is that: 1. PJ Nash does not admit that it ever hired equipment from Brambles. 2. PJ Nash does admit that it has hired equipment from CHEP from time to time, that it has been issued invoices by CHEP and that it has paid those invoices to CHEP. 3. However, PJ Nash denies the existence of any contract between CHEP and PJ Nash for the hire of equipment from CHEP. 4. Although PJ Nash acknowledges in its affidavit evidence that the "account creep" (submissions, paragraph 7(a)) build-up of pallet charges occurred largely due to incompetence or inaction by its own staff, the conduct of CHEP should be viewed as unconscionable and the terms as being unfair in a small business contract. 1. CHEP's primary contention is that each of the contractual documents and the nature of the parties' agreement is established on the evidence and that, as a result, in February to August 2019 (when the outstanding invoices were issued), there was a contract between CHEP and PJ Nash the terms of which included the 2016 Terms of Hire. CHEP's alternative contention is that, even if not all of the matters referred to in above are established, then by February 2019 (when the first of the outstanding invoices was issued), the parties' conduct manifested mutual assent such that the existence of a contract the terms of which included the 2016 Terms of Hire should be inferred. The commencement of the trading relationship 1. The application from FW Westmore of 18 January 1995 is a handwritten document attaching a guarantee signed by each of the two directors (CB 140 – 144) is apparent from the correspondence that pallets were hired over the following. 2. On 15 August 2000, the company sent the following fax to CHEP: "To: CHEP AUSTRALIA ATTENTION: Shane Fernandez 9562 8066 From: ROBIN WESTMORE Re: F.W. WESTMORE & SON PTY LTD ACCOUNT 344104 Pages: Date: 15th AUGUST 2005 Message: Shane as from the end of this month we shall be winding down our account Philip Nash is purchasing the Business and he shall be in touch with you about establishing new account for his company P.J. Nash Pty. Ltd. ACN No. 115323272. It has been agreed that at settlement Philip shall take ton to his account such of our pallets and crates as are in our possession or control. At settlement Philip's company shall be entitled to change its name to F.W Westmore & Son Pty. Ltd. And continue to trade as such. A copy of the Certificate of incorporation of his company is attached. Philips mobile No. is [redacted]. He has been provided with a copy of this fax and your details so as to enable him to set up an account with CHEP in anticipation of settlement. We should hope that Phil shall be able to achieve the same rate of hire on his account as currently apply to us. In effect he will be trading at the same level as we are at present. Yours faithfully, Robin Westmore General Manager" 1. Following receipt of the fax of 15 August 2005, the new company, PJ Nash, was provided with a subsidiary account with a different account number which was separate from the FW Westmore account according to CHEP's records, hire equipment began in or about September 2005: CB 1329. On 7 November 2005, Robin Westmore (who had previously been employed by FW Westmore and was subsequently employed by the new company, PJ Nash) wrote to Brambles as follows: "Shane we're still getting our Accounts via fax on a weekly basis rather than by email once per month as you had agreed to put in place for us. Both Joelene and myself have spoken to you previously regarding this and received assurance that it was in place. The left hand and the right hand seem to be at odds! We are still trying to finalise balance on the old FW Westmore & Son Pty Ltd 344104 account. We're almost there but emailed Simon Jonson separately with respect to 12 Black Crates that needed to be reversed. Please ensure the account reverts to monthly. In the interim we will not be paying the most recent weekly account. Please ensure your man in Sydney doesn't adopt this usual high handed stance and threaten to close off the account when the problem is a stuff up in the Admin Dept. Regards, Robin Westmore" 1. CHEP was incorporated on 23 November 2005 and in 2006 entered into an asset sale agreement with brambles. Clause 7.1 of that agreement provided that CHEP was entitled to the benefit of all of Brambles business contracts from the effective date (CB 68, 188). Following entry into that agreement, Brambles sent a letter to PJ Nash in the following terms: "The Manager F.W. Westmore & Son (P.J Nash Pty Ltd T/As) 542 Footscray Road WEST MELBOURNE VIC 3003 Dear Customer As you may be aware, CHEP is part of the Brambles group of companies. In November 2005, Brambles announced that it would focus its resources on the businesses of CHEP and Recall, and sell its other businesses, including Cleanaway and Brambles Industrial Services. Brambles' Australian businesses, including CHEP, are carried on by Brambles Australia Limited. The pending sale of Cleanaway and Brambles Industrial Services has made it necessary to move the CHEP business into another company in the Brambles group; CHEP Australia Ltd. CHEP Australia Ltd is an Australian company and a wholly owned subsidiary of Brambles Industries Limited (which is listed on the Australian Stock Exchange). To make this as easy as possible for you, Brambles Australia Limited will transfer its contractual and commercial arrangements with you to CHEP Australia Ltd. This transfer will take effect from midnight, 3" June, 2006 and apply to any of the following agreements you have with CHEP at the date of this letter: Terms of Hire; Terms of Sale; Dangerous Goods Containers Terms of Hire; CHEPCard Terms and Conditions; CHEPStretch Terms and Conditions; Access Service Agreement; CHEPMate Terms; Application for Commercial Credit. Further details of the transfer are set out in the attachment to this letter. | would like to stress that there will be no change at all to your current hiring arrangements with CHEP. If you have any questions at all in relation to this letter, or the attachment, please contact your CHEP account executive or CHEP Customer Service on 13 2437. On behalf of CHEP, | would like to thank you for your business to date and assure you that we look forward to a successful ongoing business relationship with you. Yours sincerely, Howard Wigham President, CHEP Asia-Pacific" 1. PJ Nash admits receipt of that notice: defence, paragraph 10(a). The notice refers to the Terms of Hire in unambiguous terms. 2. After receipt of the notice, PJ Nash continued to hire equipment from CHEP each week over the next 13 years (CB 1325 – 1328). 3. The nature of CHEP's business during this period is helpfully described in Chep v Bunnings at [4] – [8], where McDougall J notes that the terms of trade permit sale or use to non-hirers "on terms including that the hirer remains liable for hire charges until the pallets are passed on to another hirer, or returned to Chep, or otherwise dehired". McDougall J noted (at [14] – [17]) some of the ways that customers could terminate the hire relationship by returns and redemptions. The Terms of Hire as at this period, set out by McDougall J at [19], are the same as the pre-2016 Terms of Hire set out in the Court Book in these proceedings. I note the observation at [31] that the contractual context included recognition that hirers may part with possession of equipment in favour of non-hirers (in which case the pallets may no longer be in the possession of the hirer, a significant issue in these proceedings, where PJ Nash claims that knowledge of the pallets not being in its possession means that CHEP was put on notice of errors and unfairness in their invoices). 4. Similar evidence was given in these proceedings, but the clarity of explanation given by McDougall J makes his Honour's description particularly helpful. While great caution must be exercised when looking at the facts in other cases (s 91 Evidence Act 1995 (NSW)), these factual matters are neither controversial nor the subject of challenge in these proceedings. 5. Although CHEP may be the largest company of its kind in the world, it is not the only supplier of pallets. As noted above, it was open to PJ Nash to stop hiring equipment from CHEP at any time, as Mr Nash acknowledged in cross examination: "`Q. You agree, don't you, that at any given time it was open to PJ Nash to stop hiring equipment from CHEP? A. Yes." (T 73 lines 29 - 31) 1. Mr Nash agreed that he never queried the reference to "existing agreements" in the notice or the reference to Brambles' "hire and sale arrangements with you": "Q. But you agree with my question, don't you, that - A. We did write - Q. - after receiving this letter, no-one from your company wrote to CHEP saying, "What are the terms of hire that are referred to in this letter"? A. No, no. Q. And you'd agree that, after receiving this letter, which was in 2006, your company continued to hire equipment for about 13 years up to 2019, correct? A. Yes." (T 76 lines 21 - 30) 1. On 28 December 2006, more than six months after the letter of 26 May 2006, PJ Nash sent a fax to "CHEP Accounts" as follows: "To: CHEP Accounts From: Robin Westmore Re: Unauthorised Transactions Pages: 2 Date: 28/12/06 We refer to your December invoice R3415881 for $2,884.91. That invoice does not contain the reversals requested in our fax of 08/12/06 a copy of which is attached. This month's invoice also needs reversals / credits as follows; 25/11/06 3TN2366677C which is another 7 pallets transferred on to us from Perfection Fresh. Those transfers have not been authorised and need to be fixed just as the two on the previous month need to be. 25/11/06 3TN2366677C for 60 Black Fold Crates also needs to be reversed. We haven't taken any crates on and once again this is an unauthorised Perfection Fresh transfer. We'll pay this month's account in full on the understanding the reversals for both November and December will be effected on the January account. If that doesn't occur then we will do our own adjustments against the January account and short pay you accordingly. Hopefully you can sort it out before that needs to occur. Regards, Robin Westmore General Manager " (CB 732-733) 1. The fax of 28 December 2006 is consistent with compliance with clause 3(d) of the 2006 terms, which were as follows: "The Hirer must within 28 days the date of an invoice give written notice to CHEP if it objects to any item or calculation in that invoice, and CHEP may take that objection into account in a subsequent invoice to the Hirer. If the Hirer fails to give the notice within the time prescribed, it is taken to have accepted the contents of the invoice. Payment of subsequent invoices from CHEP incorporating any adjustments by CHEP resulting from an objection constitutes a final determination of the objection as between CHEP and the Hirer." 1. There are similar faxes sent by PJ Nash to CHEP on 8 February 2007, 30 May 2007 and 31 December 2007, the text of each of which is as follows: "To: CHEP Fax No: 1300 652 329 From: Robin Westmore Re: Account 301822 Tax Invoice R3530478 Pages: 1 Date: 30/05/07 Once again we need you to effect some adjustments on this month's account. Transfers relating to Perfection Fresh are not ours. This applies to both pallets and crates. The black crate scenario is further confused by 36 going either way and there being a "transfer on" of 108 which appears to be the number of hire days you have purported to extract! The docket numbers needing adjustment / reversal are: 24/05/07 – 3TN633732C for pallets 24/05/07 – 3TN633732C for crates You will need to work out how 108 crates got transferred on, 36 were taken off and we were left with a closing balance of 72! It doesn't inspire a lot of faith in your system at a point where our "relationship manager" informs us the Hire Rate has been increased because of the market demand for better service. Regards, Robin Westmore General Manager" (Exhibit B, p 23) "To: CHEP Australia Ltd Attention: Pallet Accounts From: Roz Goss Re: Tax Invoice W3695756 Pages: 1 Date: 31/12/07 To Whom It May Concern: Please note that the above mentioned invoice totalling $5,329.71 was short paid by $10.55 being the invoiced amount for Black Fold Crates. We do not deal in Black Fold Crates and we do not deal with Perfection Fresh either. There is also another transaction for Perfection Fresh for pallets that is not ours and I would appreciate you reversing that transaction also. Docket No. 2TN5070545C Effective Date: 06/12/07 If you have any queries please don't hesitate to call. Regards, Roz Goss Accounts" (Exhibit B, p 25) "To: CHEP Australia Ltd Fax No: 02 9856 2500 From: Robin Westmore Re: Tax Invoice No. R3440508 Account No. 115323272 Pages: 1 Date: 08/02/07 Once again we have to write and request reversals on the abovementioned invoice. Item No. 1TN1671607R for 7 pallets with "Lion Nathan" is not ours and is not authorised. Would you please reverse this on next month's account. Regards, Robin Westmore General Manager" (Exhibit B, p 26) 1. Clause 22 of the 2006 terms provided: "CHEP may change these terms (including, but not limited to, any charges payable by the Hirer) at any time. CHEP must give the Hirer written notice, signed by a CHEP director, of the changes. By hiring additional equipment from CHEP, taking a transfer of Equipment onto the Hirer's account, or paying the next invoice after notification of any changes, the Hirer accepts and is bound by the changed terms in respect of all Equipment in the Hirer's possession or control as from that date. If the Hirer does not accept the change, it must immediately notify CHEP to close its account and within 7 days return all Equipment on hire." 1. The situation remained the same until 14 June 2016, when CHEP gave notice it was updating its standard Terms of Hire with effect from 1 August 2016, and also providing key changes in 2016 Terms of Hire from the 2006 Terms of Hire. First, there was a covering letter explaining these changes: "Date: 14 June 2016 F W Westmore & Son Store 46-48 Melbourne Market WEST MELBOURNE VIC 5111 For the attention of the Authorised Officer, Subject: Update to CHEP's Terms of Hire from 1 August 2016 CHEP Australia Limited ("CHEP") is updating its standard Terms of Hire to reflect legislative changes, and wherever we can we have simplified and made them easier to understand. The Terms of Hire provide the basis for CHEP and its customers to share and reuse our standardised platforms in moving your goods through the supply chain. The updated Terms of Hire will take effect from 1 August 2016. To assist you in understanding the new Terms of Hire the major changes are shown on the following pages comparing the updated clauses to the previous clauses. There are also Frequently Asked Questions (FAQs) to assist you, and a copy of the New Terms of Hire for your records. Should you have any questions about the new Terms of Hire and how they will apply to your business, please contact your CHEP account manager or Customer Service on 13 CHEP (2437). On behalf of CHEP, I would like to thank you for your ongoing business, assure you of our commitment to meeting the needs of your business every day from our extensive Australia wide network, and we look forward to working with you to build better supply chains together. Yours sincerely, Phillip Austin President CHEP Asia Pacific" (CB 306) 1. Next, a copy of the new Terms of Hire was provided. This document does not need to be set out in full, because the final document in the bundle not only set out the relevant changes in summary form but put them in an easy-to-read table of "before and after" provisions. These were as follows: "CHEP's 2016 Terms of Hire – Key changes from the 2006 Terms of Hire This summary is general in nature only, it does not outline all of the changes that have been made from the 2006 version of the Terms of Hire ("2006 Terms of Hire") and is not to be relied on. CHEP recommends that you carefully read the new Terms of Hire ("2016 Terms of Hire") in their entirety to understand how these may impact you and your business. 2006 Terms of Hire 2016 Terms of Hire Clause references referred to the 2006 Terms of Hire and capitalised terms have the same definitions as in the 2006 Terms of Hire Clause references are now to the 2016 Terms of Hire and capitalised terms have the same definitions as in the 2016 Terms of Hire Produce Containers are not specified to be made of any particular material or have any particular Produce Crates are specified to be plastic and have a capacity of less than 100 litres and must be taken in full pallet quantities (clauses 1 and 2(d)(3)). capacity, and now only those with a capacity of less than 100 litres must be taken in full pallet quantities (clauses 1 and 5(f)). This is unchanged, however to be recorded as Equipment is deducted from the Hirer's Quantity on Hire when hired Equipment is returned to CHEP at a Service Centre authorised to accept that Equipment (clause 2(a)(2)). Returned it must be Returned during that Service Centre's operating hours (clause 3(c)). Transfers: Transfers: Notification of a transfer to CHEP could only be by an approved CHEP transfer document • Notification of a Transfer must be in a manner that is reasonably acceptable to CHEP (clause 4(a)(1)). (clause 2(b)). • CHEP may now only refuse to approve a Transfer in its reasonable discretion, and will refuse to approve any Transfer not notified within 180 days (clause 4(a)). • CHEP may refuse to approve a transfer (clause 2(b)). • CHEP may offer assistance for the management of disputes between Hirers through the CHEP customer portal, however this is limited to the making of recommendations only (clause 4(d)). • Dispute management of transfers is offered through CHEPedia, however no reference to this is made in the 2006 Terms of Hire. Compensating adjustments for credits had to be made over the next 6 CHEP billing cycles (being not less than 180 days in total) (clause 3(c)(2)). The process for credits has not been changed, however the time period for compensating adjustments has been reduced to 90 days (clause 7(b)). If an invoice has a negative amount payable, CHEP may adjust this to zero or an amount that CHEP considers appropriate in the circumstances (clause 3(c)(3)). This has been removed and the concept of Escrow which has been operating for some time has now been included in the Terms. If Equipment Days on an invoice is negative, CHEP may adjust this to zero (Escrow) and make a compensating adjustment to the Hirer's Equipment Days by applying the Escrow over the next 90 days (clause 7(c)). The time period for invoice objections has been increased to 60 days (clause 7(f)(1)). Invoices must still be paid even if the Hirer objects to anything in the Objections to invoices must be made within 28 days of the date of the invoice. Payment of subsequent invoices incorporating any adjustments from an objection constitutes a final determination of the objection (clause 3(d)). invoice (clause 8(a)), however there is now an opportunity for the Hirer to make a further objection at the time of payment of that invoice so that payment does not constitute final determination of the initial objection (clause 7(f)(3)(B)). Destroyed Equipment: Destroyed Equipment: • Compensation is payable if the Hirer establishes to CHEP's satisfaction that Equipment on hire is destroyed (clause 4(b)(1)). • Compensation is payable (unchanged from 2006 Terms of Hire) if the Hirer establishes to CHEP's satisfaction, which must be reasonable, that Equipment on hire is destroyed, contaminated, rendered unusable or damaged beyond economic repair. The Hirer must also appropriately and lawfully dispose of the Equipment at the Hirer's cost and provide CHEP reasonably satisfactory evidence that this has been done (clause 10(a)). • Equipment returned to CHEP will be treated as Destroyed Equipment if it is in CHEP's opinion contaminated, rendered unusable or damaged beyond economic repair. Compensation is payable as well as costs of disposal (clause 4(c)). • CHEP can refuse to accept a Return of Equipment that it reasonably considers is contaminated, a risk to health or safety, rendered unusable or damaged beyond economic repair, and that Equipment will be treated as Destroyed Equipment (clause 10(b)). The Lost Equipment Compensation Limit is the amount that the Hirer would have paid to CHEP if the The Lost Equipment Compensation Rate will not exceed the amount that the Hirer would have paid to CHEP if the Lost Equipment had been hired for the next 5 years at 50% of CHEP's posted hire rate (clause 4(b)(2)). Lost Equipment had been hired for the next 5 years at 50% of the sum of: • The Standard Hire Rate for that type of Equipment; and • 5 times the Standard Issue Rate for that type of Equipment (clause 10(d)). There is no express restriction on Hirer's repairing Equipment. The Hirer must not attempt to repair any Equipment or allow any person repair any Equipment other than CHEP (clause 10(f)). Immediate possession of Equipment (clause 4(d)): Immediate possession of Equipment (clause 11(c)): • If CHEP takes possession of Equipment, the Hirer must pay CHEP's actual costs. • The requirement to pay CHEP's costs has been deleted • If the Hirer shows that Equipment was on hire to the Hirer, CHEP will make that same amount of Equipment available to the Hirer upon request. • The Hirer will also now have the option of having their Quantity on Hire deducted by that same amount of Equipment recovered. The Hirer indemnifies CHEP in respect of a breach by the Hirer of any of the Hirer's obligations under the 2006 Terms of Hire (clause 6(b)(1)). This has been deleted (see indemnities in clause 13(c)(2)). Refers to the Trade Practices Act 1974 (clause 12). Refers to the Australian Consumer Law as the Competition and Consumer Act 2010 has replaced the Trade Practices Act 1974 (clauses 1 and 13(a)). Complex regime around Intellectual Property Rights and licensing (clauses 15 to 17). Largely deleted and greatly simplified (clause 17). The 2006 Terms of Hire do not specify a governing law. To give clarity in the event of a dispute, the 2016 Terms of Hire are specified to be governed by NSW law, with NSW courts having non-exclusive jurisdiction (clause 23). Frequently Asked Questions 1. What do I need to do? Please read the new terms carefully and seek independent legal advice should you wish. Your acceptance of the 2016 Terms of Hire will be given when you take an issue or transfer of equipment or pay your next invoice. 2. Will my price be affected? No, your current price will not be affected by accepting the 2016 Terms of Hire. 3. Do I need to inform my third party pallet controller? Yes, you should inform your third party pallet controller to ensure that they are also aware of these changes to the Terms of Hire. 4. Is there any impact on how I return my equipment? The 2016 Terms of Hire do not impact how equipment is returned, however they do make clear that equipment can only be returned to a Service Centre authorised to accept returns of that type of equipment during that Service Centre's operating hours. These details will be available on the CHEP customer portal, which is currently www.CHEPedia.chep.com. 5. Can I get more information about the new Terms of Hire? Yes, you can request more information from CHEP at any time by contacting your account manager or Customer Service on 13 CHEP (2437)." 1. Further, all the relevant clauses were expressly picked up in all of the invoices from CHEP from 1 August 2016 as follows: "ALL EQUIPMENT ON THIS INVOICE IS SUBJECT TO CHEP'S FOLLOWING TERMS AS APPLICABLE: Terms of Hire, Terms of Sale, Dangerous Goods Terms, Access Service Agreement, CHEPStretch Terms." 1. Mr Nash, in cross examination, did not attempt to deny receiving the letter of 14 June and its attachments, acknowledging that it was addressed to the company's correct address: "Q. But you don't have any reason to doubt that it would have received it, is that right? A. It's addressed to the company." (T 77 Line 29-31) 1. PJ Nash was given plenty of notice for these changes. These 2016 Terms of Hire were sent approximately six weeks before they came into effect, which would have been ample time for PJ Nash to make alternative arrangements if it did not propose to agree to the contract in question. 2. Thereafter, PJ Nash received weekly invoices issued by CHEP by email, as Mr Nash acknowledged: "Q. But you do agree PJ Nash hired pallets from CHEP between 2005 and 2019, correct? A. Yes. Q. You agree that PJ Nash received invoices over that period from CHEP for that hire of equipment, correct? A. Yes. Q. You understand that PJ Nash paid those invoices as they were received from time to time up until about December 2018, correct? A. Yes." (T 71 Line 46 – T 72 Line 6) 1. What is more, those invoices were paid because, as Mr Nash acknowledged in his evidence, PJ Nash had an obligation to do so: "Q. And you understood that PJ Nash did so because it had the obligation to pay those invoices, didn't it? A. Yes." (T 72 line 8-10) 1. One of the features of these invoices, as can be seen from the invoices dated 18 June and 25 June 2016, was the large notice about the upcoming change to the Terms of Hire on the first page. A screenshot of this is as follows: (Exhibit B, Page 122) (Exhibit B, Page 115) 1. As the screenshot shows, CHEP's notice referring to these new Terms of Hire was highly visible to any person reading this document. The notice invited the reader to access the "detailed Terms of Hire", the "comparison table highlighting previous clauses to updated clauses" and also provided a list of what were called "frequently asked questions" as well as a link to CHEP website, which is accessible to all CHEP customers. There was a strong invitation to click on the links provided, which effectively incorporated the linked material for any reasonable person reading the notice: Defteros v Google Inc [2021] VSCA 167. 2. PJ Nash continued to hire equipment from CHEP after receipt of that notice. The Terms of Hire were accessible through the online portal as well as being available for download from the CHEP website. Mr Nash accepted that the portal had been available to PJ Nash since approximately 2015, although indicating that he did not have the computer skills to access it by himself. The 2016 Terms of Hire and CHEP's pooling system 1. What features, if any, of these new Terms and Conditions changed the way in which the parties did business? The affidavit of Mr Nash sets out how difficulties developed in terms of the company having rising numbers of pallets for which they were being charged. What factual events contributed to the creation of these difficulties, and are these connected either to the new way of doing business or the increase in the number of pallets? 2. First, I will summarise the relevant provisions of the 2016 Terms of Hire: 1. Equipment is added to a Hirer's Quantity on Hire when it is issued to the Hirer, there is an approved transfer from another Hirer, or there is an adjustment under the Terms (cl 3(a)). 2. Equipment is deducted from a Hirer's Quantity on Hire when it is returned to CHEP, there is an approved transfer to another Hirer, or there is an adjustment under the Terms (cl 3(b)). 3. A Hirer may only transfer Equipment to another Hirer if CHEP is notified of the transfer, it is established that the other Hirer has accepted the transfer, the other hirer has an active account with CHEP and CHEP approves the transfer (cl 4(a)). 4. CHEP may refuse to approve a transfer in its reasonable discretion and will not approve any transfer that occurred more than 180 days prior to the date that CHEP is notified of the transfer, unless otherwise agreed by CHEP (cl 4(a)). 5. The Hirer must not part possession with Equipment unless it is returned to or collected by CHEP, transferred to another Hirer, or the Hirer maintains records of the circumstances in which it parted possession and the terms on which it did so (cl 4(b)). 6. The Hirer is responsible for all equipment in its Quantity on Hire or hired out or lent to it by CHEP, whether or not that Equipment is in its possession (cl 4(c)). 7. the Hirer must pay the agreed charges in respect of each item of Equipment, all other charges agreed by the Hirer and CHEP from time to time, and any other amounts owing under the Terms (cl 6(a)). 8. If the Hirer objects to anything in an invoice, the Hirer must give written notice to CHEP within 60 days of the date of the invoice and if it fails to do so, it is taken to have accepted the contents of the invoice (cl 7(f)(1)). 9. The Hirer must pay the full amount of any invoice without deduction or set-off to CHEP within 7 days of the date of the invoice, unless otherwise agreed by CHEP, failing which the Hirer must pay interest at the Commonwealth Bank of Australia Corporate Overdraft Reference Rate (cl 8(a)-(b)). 10. If the Hirer establishes to CHEP's satisfaction that Equipment on hire or loan is lost, the Hirer must pay the Lost Equipment Compensation Amount or such other amount as agreed between the Hirer and CHEP. The Hirer remains liable to CHEP for all charges in respect of Lost Equipment until payment of the compensation (cl 10(c)). 11. The Hirer acknowledges that the Lost Equipment Compensation Limit is a realistic pre-estimate of CHEP's loss. If the Hirer or CHEP recover equipment for which the Hirer has paid compensation under clause 10(c), CHEP will refund the amount of compensation less CHEP's costs and the charges that would otherwise have been due (cl 10(d)). 1. How did the CHEP pooling system work? Mr Trussell provided a comprehensive overview of this method of business, which Mr Smith has helpfully summarised in his written submissions as follows: 1. CHEP issues equipment from a service centre to a customer and the customer is recorded in CHEP's systems as the hirer of the equipment. 2. The customer then uses the equipment in its business. 3. Once the customer has finished using the equipment, it either returns the equipment to a CHEP service centre or agent, or transfers the equipment to another CHEP customer. If the equipment is returned to a CHEP service centre, CHEP then hires the equipment to the next customer. 1. To transfer equipment from its own account to the account of another CHEP customer, a customer physically transfers the equipment and creates an online transfer entry on the Portal. In the event that equipment is incorrectly transferred in an online transfer entry, the recipient of the transfer can reject it through the recipient's Portal account. 2. This is a straightforward system of hire of equipment which was in use across the board by CHEP for its more than 8,000 customers. As is set out below, the problems which arose for PJ Nash did not arise from any change to the Terms of Hire or any particular term of the contract, but from internal management, organisation and book-keeping problems. Mr Nash's description of problems at PJ Nash 1. The first point to note is that there was a steady increase in the number of pallets prior to the changes to the Terms and Conditions first foreshadowed in the letter of 14 June 2016. This increase in pallet numbers was not due to any change in business practice apart from the greater use of record-keeping technology. As the comparison table between the old and new Terms and Conditions shows, there was very little other change of significance. 2. The factors operating over this period contributing to the growth in numbers related essentially to internal decisions and reorganisations by PJ Nash. Mr Nash was quite candid in his affidavit evidence about what these problems were and listed them as follows: 1. The "very rushed move" to a new warehouse in 2015: PJ Nash substantially changed many of its business models in 2015, as Mr Nash sets out in his affidavit at paragraphs 42 - 43. A particular problem was the change of location of the warehouse where the pallets were stored: "42 In 2015 the Defendant business went through a significant change. In particular the location of the warehouse of our business moved from the wholesale market at Footscray to the new location of the wholesale market in Epping in Victoria. 43 This was a very rushed move, and we had to move all the equipment, stock, and belongings of the defendant overnight. It was what I would describe as a massive logistical nightmare." 1. Problems with the transfer of pallets from supermarkets: PJ Nash was having problems with the large supermarket chains which they supplied. Aldi, in particular, would not transfer pallets to its own account with the plaintiff (which would have saved them the trouble of returning them to PJ Nash). As Aldi was such a big client, it was "difficult to raise this topic with them" so instead of raising this issue with Aldi, PJ Nash's staff tried "speaking to the plaintiff". What was said to the plaintiff's staff was not revealed, beyond noting that PJ Nash was told to "sort it out" with PJ Nash's own customers: "48 In around 2017 we noticed that the bills started getting so big that it was beginning to become a problem. 49 After a look into what was going on we noticed that pallets were not being transferred off the account that we were using with the Plaintiff properly. 50 At around this time, the customers of our business were probably 80% supermarkets. Our Biggest customer was Aldi. 51 The other two major customers were Woolworths and Coles. 52 With the latter two customers, their systems for managing Chep pallet were fairly good, but we still had issues. On the other hand, the systems that were maintained by Aldi were not as tightly controlled and inadequate for timely processing of equipment movement, and it was often the case that Aldi would not transfer pallets itself to its own account with the Plaintiff. I say this based on my experience in discussion with staff of the defendant, and with staff of Aldi with whom we would deal in supplies. 53 In my experience, when this type of problem would occur, it put a lot of pressure on the Defendant. The reason for this was that they were one of our biggest customers, and it would be difficult to raise this topic with them. 54 Instead, we would try to rectify the issue by speaking to the Plaintiff, however the usual response was to "sort it out with the customer"." 1. Staffing changes: Mr Nash replaced many of the staff over this period. However, he continued to use Mr Westmore. He set out at paragraph 55 that he understood that Mr Westmore raised problems if and when these occurred: "55 the Defendant has always raised concerns with the Plaintiff about its systems of recording pallet movements and allocation to account holders. In this sense, I understood the account manager for the Defendant, Robin Westmore, would raise these directly with the Plaintiff when reviewing invoices received and doing account reconciliations. Annexed to this affidavit and marked D3 is a copy of a fax sent by the Plaintiff to the Defendant dated 28 December 2006." Unfortunately, it is clear from the documentation produced that Mr Westmore was not in fact raising these matters, or indeed any matters, with PJ Nash. The number of pallets for which PJ Nash was paying therefore continued to rise in an unchecked fashion. 1. Errors in PJ Nash's accounting records: By the end of 2018, about three years after these problems started, Ms Goss discovered that there was "an error" in the way that PJ Nash's information was being entered onto its portal by its staff. Precisely what that error was, and why it took so long to identify it, are not revealed, but Mr Nash acknowledged that these internal errors of PJ Nash were "the most significant or main reason" why the number of pallets increased so rapidly from February to December 2018: "56 By December 2018 we noticed that the number of pallets on our system was becoming ridiculous, and becoming a very significant expense. At around that time we also experienced a business downturn which provided reason to examine every one of our expenses and investigate whether it was necessary. With the business downturn most of our running costs reduced except Chep account. I recall that my staff member, Roz Goss, discovered that an error in the way that information was being entered into the Chep portal, particularly the information from the relevant paper dockets that had been issued to Aldi when transferring pallets. This appears to be the most significant or main reason why the account balance spiked from 3600 pallets in February 2018 to 5326 pallets in December 2018. 57 In essence, these pallets should not have been recorded on the account that we were using, and were not in our possession and so should not have been the subject of hire charges. 58 I recall at around that time being told by Roz that she had contact the Plaintiff to correct the balance, but was informed that she could not do so because of the limited three month period for rectification under the Plaintiff's trading terms." 1. Mr Nash's lack of involvement until 2018: Mr Nash acknowledges that he only became "more involved" in "about 2018": "59 I became more involved in these matters in about 2018. The Plaintiff would not assist, in that when I would raise the matter (such as through conversation with Simone and Pasquale Valeri – known as 'Perc' – as a deposed to below), the concern was never wholly addressed. It was clear the numbers of pallets and crates on our account were no longer in the Defendant's possession or potentially Aldi's possession and had been, or would have been, returned by Aldi to the Plaintiff without proper allocation of the returns by the Plaintiff. These matters were discussed with Perc. As I understand from conversations with him, Perc was an account manager at Chep. I recall a number of conversations with Perc in late 2018 wherein I said words to the effect that: • we don't have the pallets and you know I have to tread carefully trying to demand them from Aldi they are our biggest customer • we have sent pallets into Aldi and they have not come off our account • why can't they be taken off our account I recall that Perc would respond with words to the effect that, "you have to take this up with Aldi, we don't get involved in disputes between trading partners." 60. After attempts with Aldi did not resolve matters I again went to Perc and said words to the effect of "what can you do to help us", Perc responded, With words to the effect that "we can give you training to help with this". I responded with words to the effect "that would be great but we need to sort the situation, and how do we resolve the issue with Aldi not accepting our pallets onto the account". 61. I recall in or around January 2019 the plaintiffs produced a "Lost Investigation Report" in relation to the account that was being used by the defendant. The report showed that the primary cause of the losses on the Defendant's account was rejected 'transfer off' by the receiving party, indicating that the receiving party has refused to accept responsibility for the pallets for some reason. Annexed to this Affidavit and marked D4 is a copy of the spreadsheet that I recall went with the email. I have searched my records, and the records of the defendant, and I have not been able to locate the email with which this document was sent: however I recall that this document was sent by email and believe it was in January 2019." 1. When Mr Nash did become involved in trying to resolve the situation, further problems arose. Mr Nash asserts that the conduct of these negotiations by CHEP were a significant factor in the problem becoming intractable. He identifies this conduct as follows as being due to "black market" solutions not being used: "74. Around this time I had a further discussion with Simon Johnston in or about March 2019 to discuss the remaining lost pallets that weren't being removed off the Defendant's account. I recall Simon said words to the effects that "the easiest way to resolve that is to buy the balance off the black market and it would be an easy exercise and it would be cheaper as well." I responded words to the effect that "our stance was that we never buy black market pallets because it fuels the situation." 75. Based on my discussions with both Simon and Perce, I had the impression at the time of those discussions that they appreciated and understood that while the system recorded that there were around over 1000 pallets still hovering on the system allocated to the account used by the defendant, that we did not actually have these pallets in our possession." 1. However, as Ms Tadros and Mr Trussell confirmed in their oral evidence, the black market was illegal. 2. These problems all began in 2016. Ms Goss, who had worked for PJ Nash for about 15 years, confirms that prior to 2015 there were no difficulties: "As I understand it was never, until 2015, the kind of invoices that was particularly expensive or concerning. By that I mean that I do not recall any instance in which Philip or anyone else for PJ Nash during that period raised a concern with any of the staff of the Plaintiffs about the number of pallets on the invoices or the charges for the pallets on the invoices." (CB: 93, paragraph 8 of Ms Goss's affidavit). Negotiations between CHEP and PJ Nash 1. A short history of the negotiations between the parties in 2018 and 2019 is set out at the commencement of this judgment. 2. At all relevant times, CHEP maintained a series of customer assistance procedures designed to assist customers who got into trading difficulties. These are listed in Mr Trussell's affidavit as follows: 1. Making information about customers' responsibilities on CHEPedia, which is accessible at URL: chep.com/accountsinvoicinq/ my-responsibilities". 2. Providing an information brochure to CHEPs customers, available on CHEPedia, which contains advice for managing their account(s) with CHEP, the equipment they have on hire and in their control and transfers with trading partners. 3. Providing a set of interactive training modules, also available on CHEPedia. 4. Making trading partner information available at this online site as well. 5. Facilitating automated daily alerts for corrections, reversed entries and other alterations to entries on customer accounts, a service also accessible online. 6. Attaching "CHEP News" or "updates" to invoices issued to CHEP customers from time to time. This service makes it particularly difficult to accept Ms Goss's claim that she only saw the invoices and never saw any material about the Terms of Hire. 7. In addition to (f), I note that at the same time as the invoice was sent, documents headed "Transaction Listing" and "Equipment Analysis" were provided (Mr Trussell noted one such document on page 40 of the exhibits to Mr Nash's affidavit). 8. There were regular audits of equipment inventory held by customers and data analytics were used to spot problems. However, as a company with approximately 8,000 customers and moving in excess of 200 million pallets a year, it was not possible for CHEP to intervene in dispute between customers and their trading partners. It was for this reason that the Hire Terms provided that the hirer was responsible for the equipment recorded as being in their possession, whether that equipment was physically in their possession or not. If there was a dispute between trading partners as to who had the pallets, CHEP may (but was not obligated to) offer assistance and management of disputes. (CB: 111) 1. It was against this background that CHEP and PJ Nash had the series of discussions set out above. As can be seen from the evidence of Mr Valeri, none of these procedures appears to have been utilised by PJ Nash, and it was Mr Valeri's proactive approach (which included preparing a loss report, giving advice about chasing up pallets and generally seeking to involve the accounting staff at PJ Nash in finding solutions to lowering the pallet numbers) that led to any effective steps being taken. 2. Mr Trussell was not cross-examined on his description of PJ Nash's problems as consisting essentially of managerial incompetence: "40 CHEP customers are informed, through information available on CHEPedia amongst other things, that poor equipment control between a CHEP customer and their trading partner may result in increased costs to the CHEP customer and lead to disputes CHEP customers are advised of this, for example, in the information brochure referred to in paragraph 39(b) above, at page 239. 41 The Defendant's conduct, which is described in paragraph 27 of the Goss Affidavit as "[the Pallets] that were being delivered to ALDI were not being transferred off our account as they should have been" is considered internally within CHEP to be an example of poor equipment control. The party transferring the Pallets off its account (as in this case, the Defendant) is responsible for properly recoding those transfers as required under 4 of the Hire Terms, referred to in paragraph 38 above. An "IOU" swap is not permitted under Hire Terms, except in the specific circumstances which are described in cause A) 4(b)(c) of the Hire Terms (referred to in paragraph 38 above); and B) 2(c)(3) of CHEP's 2006 Terms of Hire – being the version of the terms which were place prior to the current Hire Terms - a copy of which is at pages 260 265." 1. Any doubts about the role that managerial incompetence played in terms of the circumstances in which the number of pallets rose unchecked can be put to rest by examination of the evidence of Mr Nash concerning the problems in the company which caused or contributed to the difficulties. Mr Nash's cross-examination 1. In the course of cross-examination, Mr Nash stated that PJ Nash had never had an account with CHEP: "Q. Do you agree it's the defendant's account number with the plaintiff? A. Well I don't believe I've ever entered into an account. Q. You say in your affidavit that your company didn't take over the pallets of FW Westmore & Son Pty Ltd, correct? A. That's correct. Q. It would make sense for PJ Nash Pty Ltd to have a separate account, wouldn't it? A. I don't think you're allowed to take on pallets, are you, with CHEP they don't allow you to do it. Q. You agree with me it would make sense for PJ Nash Pty Ltd to have a separate account in those circumstances? A. I, I'm sorry but are you asking if I created an account or in most instances someone would open an account? Q. I'm asking you based on this document which is addressed to your company and which has an account number-- A. Yeah. Q. --in circumstances where your company didn't take over the pallets of FW Westmore & Son Pty Ltd, that it makes sense from all of ..(not transcribable).. that the defendant would have a separate account, does it not? A. No, well it doesn't if this is for a 30 days prior to, to that date which you said I took over the business. It would have meant that these pallets have been used by me during the month before I purchased the business." (T 69 line 47 – T 70 line 24) 1. He said that he was operating under "someone else's account": "Q. Well if you're of the view that there was no obligation owed by your company to CHEP wouldn't that have been a matter to raise to CHEP as to why you weren't liable for these pallets? A. I was receiving pallets and we were, yeah, we were operating under someone else's account. HER HONOUR Q. I'm sorry what did you say? You were operating under somebody else's account? A. Yeah, well as a subsidiary. SMITH Q. So you were content for your company to pay invoices that belonged to someone else's account, is that correct? A. Well that's how you guys set it up. Q. I've already shown you that documents were sent to "FW Westmore & Son PJ Nash Pty Ltd trading as", and you have accepted that your trading name was FW Westmore & Son-- A. At a point in time. At a point in time. Q. Yes, so you're not seriously suggesting that your company willingly paid invoices for someone else's pallets, are you? A. No, I'm not saying that at all. That's not what I'm saying. I'm saying I weren't involved in the set-up of account between CHEP and FW Westmore's that allowed me to be a subsidiary to hire pallets. That's what I'm - that's all I'm saying." (T 81 line 19 – 47) 1. When shown documentation that was difficult for him to deny, he gave responses such as complaining that questions didn't "make sense" and that he was "getting confused" (T 104) 2. The reliability of his answers in relation to the functioning of the accounting system was undermined by his concession that he had never used the portal, although he had seen it open when it was being used by others: "Q. Did the company pay that amount or did it take some other step? A. No. Well, we wouldn't be here if that - was that the outstanding amount of the old bill, was it? Mind you, I was on, on holidays, on a family holiday, during this in the middle of Australia at Ayers Rock or, sorry, Uluru. Q. Now, you gave evidence yesterday that you didn't use the CHEP portal very much. Do you recall saying that? A. I've never transferred on or off on that portal. Q. Does that mean you've never used it? A. Yes, I've never used it. I've looked - I've seen it and it's been opened, but I've never used it. Q. Now, you say in your affidavit at paragraph 84 that the plaintiff's CHEP account was revoked in July 2019 and you couldn't access the portal. A. That, that's right. The company couldn't access the portal. Q. So, if you had never used the portal, are you relying on someone else telling you that matter? A. Yes. Q. If I told you that Roslyn Goss says in her evidence that the portal access was revoked on 27 August 2019, you'd accept that she's more likely to be correct about that than you in light of her more frequent use of the portal. Is that correct? A. Yes." (T 105 line 42 – 106 line 17) Ms Goss 1. Ms Goss could remember very little of what occurred. 2. First, although she was responsible for dealing with pallets that came into and went out of the possession of the business including those that were hired or acquired from CHEP, she could not recall having seen any Terms of Hire or other contractual documentation, even though each bill referred to these and these documents were available on the CHEP online site: "I do not recall ever seeing or being shown prior to these proceedings, any terms and conditions related to the hire or use of the pallets of the Plaintiffs. I have never seen prior to these proceedings the Terms of Hire or Terms of Sale documents referred to in the affidavit of Ms Tadros…" (CB: 93) 1. At other times however there were other staff members who were responsible for the CHEP account. Although this was a small business with less than 20 employees, Ms Goss could not remember much about these other employees. All she could remember was that between 6 March 2018 and some time in February 2019 a woman with the first name of "Hayat" had managed incoming vouchers and invoices and would have been involved in dealing with pallets as a result (CB: 92). 2. Ms Goss was uncertain when the problem started, suggesting problems with Aldi and another client in "2014 – 2015" and could not remember details of her discussions with Mr Nash after problems began to arise (CB: 93). 3. Ms Goss described a system where Mr Nash would authorise payment of these bills without any inquiry, rather like a rates or electricity bill (CB: 92 – 93). She knew at the time they were being charged for more pallets than were kept in the warehouse but as these bills were "affordable" (CB: 93, paragraph 19) they were paid without any complaints or inquiries. 4. Ms Goss's explanation for the increase in pallets is a "change in the nature of the transfer documents used in the CHEP system by one of our suppliers being Tailored Freight" (CB: 95). This change was that they "ceased providing written physical documents to us in the form of a Proof of Delivery stamped by the supermarket chain to acknowledge receipt of order and confirm equipment quantities" (CB: 95). This appears to have been part of the system being more and more Portal-based, where the records were electronic. Ms Goss states in her affidavit: "27 Unfortunately, it eventually became to me apparent pallets that were being delivered to ALDI were not being transferred off our account as they should have been, as there appeared to be an error occurring in the system, arising from the change from physical documents to an email-based system. 28 Therefore the number of pallets notionally on the system used by the defendant started to increase beyond what we actually held in our possession at any given time" (CB: 95). 1. In other words, the increasing number of pallets being charged for resulted from problems with electronic record-keeping on the part of PJ Nash, and not as a result of any term or condition in the contract, either before or after June 2016. CHEP's witnesses 1. The evidence of these witnesses is summarised in detail as it is an important part of the background to the negotiations in 2018 and 2019. Ms Sandra Tadros 1. Sandra Tadros is the Bad Debt Recovery Specialist for CHEP, a position she has held since June 2013, so when she commenced with CHEP, the Terms of Hire in force for PJ Nash were the Terms prior to 2016. She sets out the details of how PJ Nash had an account and explains how the CHEP online portal and billing systems work. She also explains using Analysis for Excel to generate reports concerning the movement of equipment as well as the CRM System holding all information pertaining to accounts. 2. Ms Tadros also explains how CHEP pallets are designed to allow parties to move stock seamlessly between them (paragraph 28 of her affidavit of 29 June 2021). She explains how the pooling system works and how a customer can transfer CHEP pallets or equipment to other customers by physically transferring the goods and then creating an "online transfer" on the Portal. If any equipment is incorrectly transferred, the hirer can reject this and CHEP then requires written authority from the transferor before rejecting the online transfer, pursuant to clause 7(f) of the Terms of Hire. 3. Ms Tadros next explains how equipment may be returned to a CHEP service centre, adding that a customer can ask that CHEP personnel attend the customer's site to collect equipment for return. 4. At paragraphs 33 - 36 of her affidavit of 29 June 2021, she explains the Movement Analysis Report documentation and how Analysis is used to pull together data sources. 5. Having set out all that material, Ms Tadros then sets out the quantification of the amount owed on the outstanding invoices (at paragraphs 37 - 48), with a final total of $332,251.49. 6. In her second affidavit of 12 November 2021, Ms Tadros explains how equipment is allocated to the Subsidiary Account, the "black market" for CHEP equipment, methods of allocation of payments and the circumstances in which there were negotiations between PJ Nash and CHEP, including correspondence between CHEP and Mr Nash. 7. That correspondence makes interesting reading, because it shows the extent to which CHEP was prepared to go to assist Mr Nash and his company, in circumstances where CHEP had tried to support PJ Nash by payment arrangements that had not been complied with. In the CHEP email of 16 August 2019, the following history of these attempts is set out: "… The account was opened on about on or about 29 August 2025. On 26 May 2006, CHEP issued a notice to the company which enclosed CHEP terms of hire. These terms of hire were accepted once a payment was made, an issue was taken or a transfer onto the account was accepted. Further, on about 14 June 2015, CHEP issued notice to Westmore as to the change of terms to come into effect from 01 August 2016. On 25 June 2016, CHEP issued invoice 3812141749 which provide notice to customers as to the change in CHEP terms. Again, these terms were accepted once a payment was made, an issue was taken or a transfer onto the account was accepted post 01 August 2016. CHEP have tried to support your business by way the implementation of payment arrangements however these have not been complied with. These payment plans included heavily discounted compensation for equipment that FW Westmore had declared as lost, and the key driver for inflated hire balances. The account has now been escalated to CHEP's legal department who's contact details are below: Sandra Tadros CHEP Australia and New Zealand" 1. Mr Nash replied on 16 August 2019 as follows: "Thanks for the reply obviously from you're [sic] and/or Chep point of view there's only so much you can do to help. I'll wait to see the reports come through and the disparenc[sic] y of what the cost of my account could have been if we had the correct checks and balances in place as apposed [sic] to hundreds of thousands that we have paid. As you and Perc said in our meeting, Chep has many ways in which it helps it loyal customers keep there[sic] accounts in check. I must have been lost in the system or viewed as not being a loyal customer, but from yours and Chep's point of view it seems you have done everything you possibly [sic] for us. Unfortunately this help only seems to start or escalate once you default on a payment. Thanks Simon for the response, I was native to think it would hold anything more than towing [sic] the company line." 1. After Ms Tadros sent an email on 19 August 2019 containing a breakdown of figures (pages 99 - 103 of Exhibit ST 2), Mr Nash replied on 23 August 2019, acknowledging in the frankest of terms that his account "has been out of control to say the least for some years" because it had been "poorly managed": "As you can see and would now be fully aware of our account has been out of control to say the least for some years. I have had many conversations over that time with Simon and Percy about the theft among other ways chip[sic] equipment goes missing in the central markets. I have never brought pallets off the "black market" although being offered and suggested by others I should to get my account balances down. I am totally against doing this, which will only fuel an already toxic environment. The estimate that chep representative have provide [sic] me if our account was controlled tightly it would only cost between $25k and at the very worst-case $50k per year. So considering those and applying the worst-case scenario given to me by chep my account should have maxed out at $225k for the same period I have paid $1,441,217 MILLION. And even as recently as in the last two weeks I've contemplated buying equipment as a last resort. I also understand that chep has been depridived[sic] of potently [sic] the income of the equipment if was to get a credit of the equipment that had been (lost or had been stolen) We are only a small company, the last thing we want is to go to court with a large company like chep, and I am nearly positive will win in a legal sense. Although morally I feel that I have more the paid, my fair share and some the reality of the matter is it will only drain on the limited funds and everything else even more. … This offer will allow my business to keep trading without the extreme financial pressure, the poorly managed account has already caused." 1. Ms Tadros then sets out her continuing attempts to negotiate with PJ Nash, which included providing Movement Analysis Statements and other documentation designed to assist it in determining what the quantum outstanding was. These negotiations failed and proceedings were commenced on 28 August 2019. 2. Ms Tadros's cross-examination cast no light whatever on the asserted unfair provisions of the Terms of Hire. It consisted largely of her being asked questions about dealings with PJ Nash before she commenced employment with them (T 56 - 57) and challenges to the way CHEP was asserted to do business, which she contradicted (T 58 - 62). 3. As to the latter, Ms Tadros denied that she knew about any illegal activities of customers by buying them from the non-commercial pool or black market: "Q. You might recall reading that Mr Nash for the defendant gives evidence of a discussion with Simon Johnson about reducing the number of pallets on his account, you can take it from me that that is discussed in the evidence of the defendant. What I want to ask you about is in that evidence Mr Nash for the defendant suggests that it was suggested by Mr Johnson that to reduce his pallet balance that he might purchase pallets from a non-commercial pool. In your role in the debt recovery role that you occupy with CHEP are you familiar with instances where parties have reduced their pallet balance by purchasing from the non-commercial pool? A. Well, a customer if they were to do that, a customer's not going to disclose that 'cause it's illegal. So I wouldn't be none the wiser if someone has done that because they're not going to disclose it. Q. Are you familiar with any instances where with this customer or other customers where that has been done? A. No." (T 60 - 61) 1. Ms Tadros denied that customers were "compelled", before using the Portal, to accept the Terms and Conditions, but pointed out that these Terms were on every invoice: "Q. Do you recall based on your use of the CHEP online portal whether a customer is compelled to accept terms and conditions before progressing through the portal to use its functions? A. Not through the portal but it's on each invoice." (T 62) Mr David Charles Trussell 1. Mr Trussell's affidavit sets out that he is the Senior Commercial Manager and that, at the time of swearing his affidavit, had been employed by CHEP for about 26 years. 2. Mr Trussell's affidavit provides a brief outline of his qualifications and role, and then sets out answers to paragraphs 29 to 41 of Mr Nash's affidavit as follows: 1. At paragraphs 16 - 19 he outlines the CHEP business and, at paragraphs 20 to 25, the equipment they provide. 2. An explanation of the pooled systems (paragraphs 26 - 43) and, at paragraphs 44 to 51, how disputes between trading parties are resolved. 3. CHEP's fees and how these are calculated (paragraphs 52 to 72). 1. The description of the pooled system describes not only how it works but also how it provides benefits to customers, such as not having to acquire, repair or administer their own pool of equipment and simply return or "dehire" CHEP's equipment. The Portal system minimises paperwork and equipment tracking problems are easy to solve. He notes that CHEP has made software to its customers to assist them with equipment management (at paragraph 31). The result is a high level of control of equipment is possible, but "a key part of this" (paragraph 35) requires CHEP's customers to manage their own transfers in the pooled system. 2. Mr Trussell was not cross-examined on his characterisation of PJ Nash's conduct of its account as being poor management. 3. Mr Trussell sets out that CHEP provides support and assistance to CHEP customers as follows: "a) Making information about CHEP's customers' responsibilities available on CHEPedia which is accessible at URL: https://chepedia.chep.com/accountsinvoicing/my-responsibilities/. A copy is at page 234. b) Providing an information brochure to CHEPs customers, available on CHEPedia, which contains advice for managing their account(s) with CHEP, the equipment they have on hire and in their control and transfers with trading partners. This is accessible at the URL: https://chepedia.chep.com/media/97076/chep-introduction-to-equipmentcontrol-cards.pdf. A copy is at pages 235 to 256. c) Providing a set of interactive training modules, also available on CHEPedia. This is accessible at URL: https://chepedia.chep.com/trainingsupport/introduction-to-equipment-control/ and a screenshot of the homepage for which is at page 257. d) Making trading partner information available on CHEPedia which is accessible at URL: https://chepediachep.com/my-transactions/tradinq-partnerinformation/. A copy is at pages 258. e) Facilitating automated daily alerts regarding correction and reversal activities to the CHEP customers' accounts, some of which may potentially instigated by a trading partner(s). This is accessible at URL: https ://chepedia.chep.com/systems-reporting/automated-corrections-andreversals-alerts/ and a copy of which is at page 259. f) Attaching a 'CHEP News' or "updates" section to invoices issued to CHEP customer, from time to time. g) Including with the invoices issued to CHEP customers, "Transaction Listing" and "Equipment Analysis" documents, which include an "equipment balance analysis" table showing the 'Totals On', 'Totals Off, 'Variance % Open/Close' and 'Nett' figures. The "Transaction Listing" document also includes a "trading partner transaction listing". | note there is a reference to this at page 40 of the exhibit to the Nash Affidavit. h) Conducting audits of equipment inventory held by CHEP's customers and developing improved processes and controls using data analytics, as referred to in the Annual Report at page 30." (CB 108-109) 1. Mr Trussell explains that CHEP cannot intervene in disputes between trading partners of the kind that PJ Nash was having with Aldi and others as follows: "44 CHEP has approximately 8,000 customers and in excess of 200 million Standard Pallets are moved per year. As a result, it is not possible both from an economic or resourcing perspective for CHEP to attempt to intervene in, or be the arbiter of, disputes between its trading partners if and when they arise. It is for this reason, as referred to in paragraph 38 above, the Hire Terms provide, in part, that: a) the Hirer is responsible for all equipment recorded to its account whether that equipment is in its possession or not; and b) in the event that dispute between trading partners arise, CHEP may (but is not required) to offer "assistance" for the management of disputes between its customers through the Portal, and is limited to the making recommendations " 1. Mr Trussell goes on to provide a description of how transfers are processed. He also notes that many of CHEP's customers (he estimates around 3,500) require their trading partners to have their own set of rules and explains the purpose of deadlines for customers to tell CHEP about transfers to be processed off their account (at paragraph 49). 2. Mr Trussell further explains at paragraph 50 why CHEP's ability to become involved in disputes between trading parties is limited as follows: 1. As referred to in paragraph 44 above CHEP has approximately 8000 customers and in excess of 200 million Standard Pallets are moved per year, and given this extremely large number, CHEP does not have the economic resources to become involved in what could be a very large number of disputes. (As referred to in paragraphs 20 and 22 above, CHEP also has a range of other equipment, apart from the Standard Pallets, which are offered and therefore the number of times CHEP's equipment is moved per year is even higher when all of the equipment offered by CHEP is taken into account). In order for CHEP to become thoroughly involved in disputes between trading partners, its resourcing team would need to be much larger than it currently is. 2. CHEP is not always provided with all the information that it needs to arbitrate the disputes. For example, the CHEP customers, on both sides of the dispute would need to provide CHEP with all documents and information relevant to the transactions in order for CHEP to be a fair arbiter of the dispute. Such documents and information includes things such as all the relevant purchase order documents, proof of delivery documents, details of any disputed volumes associated with the delivery and whether the transaction(s) were linked to an 'lOU arrangement', amongst other things. 3. If CHEP acts as the arbiter of the dispute there is a real risk that doing so would be detrimental to CHEP's customer relationship. There is the potential that that role will form perceptions of favouritism or unfairness amongst some of its customers because CHEP will be required to decide on outcomes which, inevitably not be in all of its customers' favour. This type of customer relationship management is unlikely to be beneficial to CHEP because, amongst other things, there is a risk that CHEP may then lose the business of the customers have formed such perceptions of favouritism. 1. Mr Trussell sets out at paragraph 74 the methods used by CHEP to track and record the standard pallets in order to help customers like PJ Nash to reduce pallets in the "non-commercial" pallet pool as including the following: 1. Requiring each CHEP customer to promptly record transfers on their account via the Portal. 2. Producing and retailing a CMB (a 'customer movement document') to facilitate manual data entry for the recording of transfers (or exchanges). 3. Facilitating uploads of transactions through software other than the Portal, such as "2iC", "Palletwatch" and "Precise Pallet", all of which are examples of third-party equipment management system software. 4. The work done by CHEP's Asset Protection Team, which is responsible for: 1. Tracking CHEP's equipment through the hands of CHEP's customers from time to time; 2. Conducting audits to reconcile CHEP's records of the quantity of equipment on hire to its customer with the actual quantity of equipment in the possession of its customers; and 3. Recovering lost hire equipment, from both CHEP and non-CHEP customers. (CB 118-119) 1. Mr Trussell was cross-examined only very briefly, and in a general way (as Mr Smith complained, at T 30). He was asked at T 30: "Q. Mr Trussell, before the break you might recall I was putting to you propositions about the test system, in particular you might recall my putting to you a proposition about - sorry, I withdraw that. I will go over it again very briefly. It's correct, isn't it, that the system as administered by CHEP might allow for a circumstance where the pallet or a number of pallets is recorded on the account of a customer that has physically left the possession of that customer. Is that correct? A. That would be correct but only if they haven't notified us correctly of the transfer." 1. Mr Trussell explained that there was a 180-day limit for customers to do this. I am unaware of any submission by PJ Nash that 180 days was insufficient time. 2. Mr Trussell was also asked about the "black market" for CHEP goods (T 32). Like Ms Tadros, he replied firmly that this conduct was illegal: "Q. Would you agree that in practice for customers who are looking to reduce their ongoing hire charges or pallet balances, that one of the options actually available to them is to try to source pallets to return to a service centre? A. Well from my perspective that would be illegal activity if you're suggesting they deal in, in our assets. Our assets or our equipment or pallets always remain the property of CHEP. Q. It's your understanding that attempting to source pallets if I can say from the non-commercial pool to return them to a service centre would you understand to be illegal activity? A. That would be my understanding yes, I'm not a lawyer but you know we own those assets." Mr Pasquale Valeri 1. Mr Valeri is a Business Development Manager for CHEP specialising in fresh food businesses. He has been employed by CHEP since 2000. His affidavit of 12 November 2021 sets out his role in the negotiations with PJ Nash. 2. Mr Valeri sets out how he was contacted in June 2018 about lost crates and how he made adjustments to the amounts to allow for this. After subsequent emails he visited PJ Nash in November 2018 and was told by two staff members, Milan and Hayat (from the PJ Nash finance team) who told him that there still remained a large number of CHEP equipment items which were allocated to their account although PJ Nash had in fact physically transferred these to third party training partners. 3. Mr Valeri states in his affidavit at paragraphs 15 and 16: "15 In accordance with clause 4(d) of CHEP's 2016 Terms of Hire, I am aware that CHEP will not interfere with disputes between trading partners and trading partners should reach a resolution between themselves. However, to assist PJ Nash with correcting any error which may have occurred with the transfers of equipment, I arranged for Loss Investigation Report to be generated. I provided Milan and Haya with a copy of that Loss Investigation Report. Set out at pages 11 to 19 of PV 1 is a true and correct copy of my email to Milan and Hayat dated 14 November 2018 and the attachments therein, with the irrelevant parts redacted. 16 The Loss Investigation Report provides a customer with an overview of equipment which may have been physically transferred from its account, however the electronic transfers were rejected, and the reasoning provided by the trading partner for that rejection. From the Loss Investigation Report I understood that PJ Nash would be able to discuss any rejected transfers of equipment with its respective trading partners together with identifying any errors in their current processes to be corrected for further transfers." 1. There was a further exchange of emails in December 2018 and on 21 December 2018 Mr Valeri sent the following email to Mr Nash: "Tried to call you Phillip, twice today. Further to recent conversations, find below what we can do to assist. 1. Assist with Credit on 4500 pallets, as per customer quantity request (as we wait approval on special comp rate, to pass on to Westmore's) 2. To Credit this week's invoice 4500x$0.157 x 7 days ($4,945.50) and as well/ till and including the completed week of 12 Jan invoice – which is 4 weeks of credits, all up. Which is just under $20K approx. 3. Westmore's need to make any outstanding payments, before this. 4. all other equipment Balance's outside 4500 needs to be paid. 5. Credit will be in one bulk credit of 4 weeks. Thank for your support through FMA project." 1. As to the Aldi issue, Mr Valeri states: "21 In relation to paragraph 59 of the Nash Affidavit, I recall having a discussion with Mr Nash similar to the one described. I believe that Mr Nash stated words to the effect of "Aldi are our largest customers but the Display Pallets we send them are not coming off our account". In those circumstances, it is my normal practice to confirm that the customer is required to contact their trading partner and provide supporting documentation to their trading partner to reach an agreement for the equipment to be transferred of their account. 22. On 25 January 2019, I sent an email to Mr Nash and Milan attaching a copy of the invoice for payment of compensation on 4,500 pallets at $15.00 per pallet. The invoice relevantly stated that "The Hirer remains liable to CHEP for daily hire charges in respect of lost equipment until FULL payment of the compensation invoice is received". Set out at pages 26 to 27 of PV1 is a true and correct copy of the email I sent on 25 January 2019, with the irrelevant parts redacted, and the attachment therein." 1. It was in these circumstances that Mr Nash sent the email set out at the commencement of this judgment. 2. Further negotiations were unsuccessful. Mr Valeri sets out at paragraphs 27 and 28: "27 Based on my experience in my role at CHEP, it is my understanding of CHEP's processes that if a payment arrangement is offered to a customer, CHEP will pursue the full debt owed in the event that the customer defaults upon that arrangement. I recall saying words to this effect to PJ Nash, however I do not recall when this discussion took place. 28 I understand that I had a further conversation with Milan and Philip on or around 17 June 2019, after it had been brought to my attention that PJ Nash had defaulted upon the agreed payment plan. Following that discussion, I sent an email to Ms Kovacs, which relevantly stated as follows, omitting the formal and irrelevant parts: "Hi Grace, Just spoke with Milan, re point below agreed by Milan/Philip, (as below this email) $7,500 per week / which is made up of: $5,000 per week (as ask) plus 1.5 current weekly hire, it will take roughly 15 weeks (up to 28th June) to get the account up to date in line with terms. This amount has been forecasted based on an estimated weekly invoice of $1500 and this may vary depending on his trading movement The $1500 forecast has been more due to crates started in April (present cost $1.04 per crate for April & May), and existing pallet balance after Compensation, which is more than $1500. Summary payments: $5,000 (to catch up) Plus weekly usage of equipment. Grace: can you provide the Plus weekly costs, and what is required/outstanding each week to pay those short comings." Set out at page 35 of PV1 is a true and correct copy of the email I sent to Ms Kovacs on 17 June 2019." 1. Mr Valeri was aware of a letter dated 26 June 2019 containing a final offer but was not aware of there being any reply from PJ Nash. 2. In cross-examination, Mr Valeri was asked about his role as a business manager (T 36 - 38) and the circumstances in which he and Mr Johnson (whom he told the court no longer worked for CHEP) went to PJ Nash to discuss the problems with the pallets. He explained that the problem was that PJ Nash was not getting the pallets back, although this practice was "a norm in the markets": "Q. If I can understand that correctly when you say, "leaking pallets", that means that whilst the pallet balance might state 5,000 when you say, "leaking pallets", what that reflects is the idea that a defendant might not have in its possession or circulation that full number of 5,000 pallets. Is that correct? A. I don't know, yeah, till I was, till I got to know them I, I had no idea - I don't know if he took, yeah. Q. But-- A. He - he-- Q. --by sending that email am I correct in understanding that what you suspected might have been occurring was that pallets that were being transferred onto the account used by the defendant were not being properly transferred off when physical possession had effectively left the defendant. Is that fair to say? A. No. No, what I'm saying is when they were moving their stock to their retailers they weren't getting their pallet - their pallets back which was a norm in the markets so they might have been losing, losing the pallets at that end and not getting them back. That was the suggestion." (T 40). 1. It was put to him that he must have realised 5,000 missing pallets was excessive, a proposition with which Mr Valeri did not agree: "Q. Given your experience with customers such as the defendant and others at the markets, you noticed that they had 5,000 pallets on their balance. Am I correct in understanding that that, when you saw it, seemed excessive to you? A. Well, that's, that's when I started asking Miller and the lady there, and I can't remember her name, "Do you have other farms around? I mean, why would you have a balance of that? And you should be looking at why your balance would be that large." Q. Did that seem excessive, for instance, if you were to notionally compare the balance to other- A. No. Q. -customers at the markets? A. No, not at all. No. There were lots of big balances in pallets. But, as I said, I didn't look after pallets. I looked after crates and bins, and the by product of having crates and bins was that they were on, on pallets. So therefore on my larger customers I would have an involvement with pallets." (T 41) 1. He was asked some questions about whether there was an average pallet number, which he did not agree with (T 42 - 43). 2. Mr Valeri's evidence confirmed the considerable steps that CHEP had taken to help PJ Nash regulate its accounts. As was the case with Ms Tadros and Mr Trussell, he was an impressive witness, who answered questions responsively. He made no concessions and was not caught out on any inconsistencies. Credit issues in relation to CHEP's witnesses 1. Mr Bennett has not raised any issues in relation to the credit of CHEP's witnesses. Their affidavits were carefully and fairly prepared and their cross-examination, as the above extracts confirm, was largely desultory. I accept each of these witnesses as witnesses of truth. 2. Another employee, Mr Johnson, was referred to as participating in the negotiations. In re-examination, Mr Trussell stated that Mr Johnson no longer worked for CHEP. I was not asked to draw any inference from his absence. Credit issues in relation to PJ Nash's witnesses 1. Mr Nash's admissions of his own company's management problems as the principal source of the rise in pallet numbers, in his affidavit and oral evidence, are confirmed by the contents of his contemporaneous correspondence with CHEP. I do not accept his claims that PJ Nash never dealt with CHEP; he had no difficulty negotiating with the CHEP employees when he finally became involved in negotiations in late 2018. 2. Ms Goss presented as a loyal employee doing what she could, but her memory was poor and her evidence added nothing to the material necessary to establish the defences. Was there a contract? 1. It is helpful to commence a consideration of the relevant contractual principles by setting out the opening remarks of PJ Nash's counsel, Mr Bennett, in his submissions on this issue: "47 While it may travel with a real discomfort, it is at least open to the Court to find that, in the circumstances of the case, and [sic] no contract was formed. 48 If the Court is so minded, while the court may find that the parties, and particularly the Defendant conducted themselves in such a way so as to find that there was some contract between them, that does not carry the conclusion that that [sic] terms on which the Plaintiff relies are incorporated into the contract. 49 The pleaded case of the Defendant denies that there is a contract as between the parties in any event. It is plain that there was a commercial relationship between the parties, and that the Defendant used, one way or another, the services of the Plaintiff for many years." 1. The submissions go on to acknowledge that an application for a credit arrangement was made and agreed to but to assert that there was "no executed document by any person purporting to be an application for credit or guarantee on behalf of the Defendant" (submissions, paragraph 53) and to assert that the court "should not be too ready to infer a contract in circumstances where the moment of acceptance is so unclear", citing Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 at 534, where "whatever the conduct of the Defendant, and no matter the benefit taken under the contract", it is "not clear" when the terms became known to it (submissions, paragraph 56). It is "open to the Court" (submissions, paragraph 63) to find that service of standard form letters was insufficient to bring to the attention of PJ Nash the "unusual terms" (paragraph 63) of the contracts under which the parties operated for all those years. 2. These submissions overlook the relevant principles governing formation and novation of contracts. As to formation, Courts now accept that parties may manifest mutual assent in ways other than traditional exchanges of offer and acceptance: Ormwave Pty Ltd v Smith [2007] NSWCA 210 at [68] – [75]; Brambles Holdings Ltd v Bathurst City Council (2001) NSWCA 61 at [71] – [81]; Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 42 at [369]. In Hill End Gold Ltd v First Tiffany Resource Corporation [2011] NSWCA 276 at [61] Allsop P and Meagher JA, citing these earlier authorities, stated that it was "undoubted that contractual arrangements do not only arise out of formal offer and acceptance". As their Honours went on to explain, the commercial context and the parties' acts "may evince a clear mutual intention to be legally bound in a particular respect or a relationship or a document may be "instinct with an obligation", imperfectly expressed: Moran v Standard Oil Co 211 NY 187 at 198 per Cardozo J (Court of Appeals, 1914)". As McHugh JA noted in Empirnall Holdings Pty Ltd v Machon Paull Partners Ltd (1988) 14 NSWLR 523, an offeree with a reasonable opportunity to reject the offer of goods takes them under circumstances which indicate that they were to be paid for in accordance with the offer means that it is open to the court to hold that the offer was accepted, if the reasonable bystander would regard the conduct of the offeree (including his silence) as signalling acceptance (see also Mushroom Composters Pty Ltd v IS & DE Robertson Pty Ltd [2015] NSWCA 1 at [59] - [63] as to the acceptance of the "objective" theory of contract in Australia and, finally, the summary of principles by Bathurst CJ in Pavlovic v Universal Music Australia Pty Limited [2015] NSWCA 313 at [15] – [18] and, as to the importance of the subsequent conduct of the parties, the observations of Beazley P at [118]). 3. The same is the case in relation to novation. A novation is a transaction by which all parties to a contract agree that a new contract is substituted for one that has already been made: Olsson v Dyson (1969) 120 CLR 365; [1969] HCA 3 at 368 per Windeyer J. The effect of a novation is to discharge the original contract between two parties (the continuing party and the outgoing party) and to substitute it with a new contract where the rights, obligations and liabilities of the outgoing party are extinguished and the rights, obligations and liabilities of the incoming party are substituted in their place. 4. The approach urged upon me by PJ Nash is precisely the kind of "narrow or pedantic approach" against which the Court of Appeal warned in Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473 at [86], citing this well-known description by Sir Garfield Barwick in Upper Hunter County Council v Australian Chilling and Freezing Co Pty Ltd (1968) 118 CLR 429 at 437. As the crux of novation is intention, the Court must have regard to the totality of the relevant conduct and dealings as well as to the inferences to be drawn from them: Fu Tian Fortune Pty Ltd v Park Cho Pty Ltd (2018) 19 BPR 39,031 at [44]; McMahon v National Foods Milk Ltd (2009) 25 VR 251 at [77]. The relevant evidence for contract and novation 1. The relevant evidence is set out above. It is clear that, after the fax of 15 August 2005, PJ Nash was provided with a new account number separate to that of FW Westmore and began using this account to hire equipment from September 2005. I am satisfied that the evidence demonstrates there was an agreement between Brambles and PJ Nash for the hire of equipment shortly thereafter and that, following the incorporation of CHEP on 23 November 2005 and the Brambles letter of 26 May 2006 advising the contract had been novated to CHEP, PJ Nash continued to hire equipment from CHEP over the next thirteen years. 2. The Terms of Hire are repeatedly referred to in full and identified in the correspondence and the subsequent conduct of the parties (County Securities Pty Limited v Challenger Group Holdings Pty Limited & Anor [2008] NSWCA 193 at [24] and [62]) are clear evidence of the acceptance of a novated contract. One example of such conduct was that, on at least one occasion, the staff at PJ Nash wrote asking for corrections and reversals of entries that had not been authorised. Conduct of parties, including subsequent conduct, may be accepted as constituting an admission of the state of the parties' rights: Pitcher v Langford (1991) 23 NSWLR 142 (at 160), cited in County Securities Pty Limited v Challenger Group Holdings Pty Limited & Anor [2008] NSWCA 193 at [162]. 3. The same is the case for the updated Terms of Hire attached to the letter from CHEP dated 14 June 2016. PJ Nash continued to hire equipment after receipt of that notice, a course of conduct which is consistent only with acceptance of the variation. What is more, PJ Nash had regular reminders of the variation, as each and every invoice from CHEP recited, in capital letters, that 'ALL EQUIPMENT ON THIS INVOICE IS SUBJECT TO CHEP'S FOLLOWING TERMS AS APPLICABLE", followed by a list of those terms (all of which were readily accessible through the portal, and not merely attached to one letter). 4. In addition, when the parties were having discussions in late 2018 and early 2019, both parties acted as if there was not only a contract on foot but an ongoing business relationship which both parties appear to have been anxious to preserve. The negotiations resulted in a payment by CHEP of $67,500 in exchange for the removal of 4,500 pallets. The invoice issued for this payment (CB 1314) contained the following words: "Amount shown is due to CHEP Australia as compensation for CHEP equipment deemed to be lost in accordance with CHEP's Terms of Hire. The Hirer remains liable to CHEP for daily hire charges in respect of lost equipment until FULL payment of the compensation invoice is received by CHEP. Should CHEP not receive payment within 60 days, CHEP reserves the right to cancel the compensation invoice and daily hire charges will continue to apply. Payment of compensation does not result in any transfer of property or interest in CHEP equipment (CHEP ref 8R)" 1. The amount negotiated in this agreement was a substantial sum and reflected a longstanding problem with pallets. Clearly, both parties had to be familiar with the Terms of Hire's provisions as part of the resolution of this issue (and, for that matter, disputes about entries going back to 2006), as how else would they have been able to negotiate? In those circumstances, it should be relatively easy to pinpoint the provisions in the Terms of Hire which were causing this problem - if in fact this problem arose from difficulties in the Terms of Hire. As is set out in more detail below, this is not a task upon which PJ Nash has embarked upon; what is argued is that the cumulative effect of the contractual terms are unfair and unconscionable, a position which renders many of PJ Nash's arguments difficult to follow. 2. One aspect of the evidence is, however, clear. Viewed objectively, the long period of time of the parties' conduct indicates mutual assent to enter into a contract the terms of which were clearly known to the parties from the first. First, Brambles and PJ Nash entered into an agreement on the basis of the 2000 Terms; next, PJ Nash agreed to the novation of that agreement to CHEP as per the 2006 Terms; finally, PJ Nash agreed to the variation to include the 2016 Terms. 3. I am satisfied, from the evidence of the "whole relationship" (Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 at 11,117 – 11,118), that PJ Nash entered knowingly into these arrangements in circumstances where it was at all relevant times aware not only of the existence of CHEP's Terms of Hire but of its own obligations under the contract and Terms of Hire. The 2016 Terms of Hire were clearly and repeatedly brought to PJ Nash's attention and PJ Nash took the benefit of them under circumstances indicating that they were to be paid for in accordance with the offer (Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd at 555). Estoppel by convention 1. In the event that I have erred in finding that there was a contract between the parties, I would alternatively find that PJ Nash is estopped from denying that its hire of equipment from CHEP was subject to the applicable Terms of Hire. 2. Estoppel by convention is described by K R Handley in "Estoppel by Conduct and Election", (2nd ed, 2016), [8-001] as follows: "When parties make a statement of fact or of mixed fact and law the conventional basis of their transaction they are estopped from questioning its truth for the purposes of that transaction ... Estoppels by convention can be created ad hoc, expressly, by a course of dealing, or by other acts and declarations. In such a case there must be some mutually manifest conduct by the parties with the intention of affecting their legal relationship … This form of estoppel by representation does not depend on each party's reliance on the truth of the conventional facts. The representation is that the convention, true or otherwise, has been mutually adopted for the purpose of their transaction and each party relies on its adoption when entering into the transaction." 1. The relevant principles are set out by Brereton J in Moratic Pty Ltd v Gordon (2007) 13 BPR 24,713 at [32] as requiring the plaintiff to establish: 1. Adoption of an assumption as to the terms of a legal relationship with the defendant; 2. Adoption of the same assumption by the defendant; 3. Both parties conducting their relationship on the basis of that mutual assumption; 4. Each party knowing or intending that the other act on that basis; and 5. That departure from the assumption will occasion detriment to the plaintiff. 1. There is no requirement that either party induced or acquiesced in the adoption of the common assumption by the other party (at [37]). 2. I have set out above the terms of the letter of 14 June 2016, and noted that Clause 2 of the 2016 Terms of Hire make clear that the hire of equipment was subject to those terms. PJ Nash continued to trade for more than two and a half years following receipt of this document (and the invoices containing references to it). By doing so, PJ Nash was exercising a choice in taking benefit of the offer in circumstances where CHEP was to be paid for its provision of the pallets in accordance with the offer. This signified to CHEP that the offer to provide services on the basis of the 2016 Terms of Hire had been accepted. 3. This is a clear and consistent course of conduct over a long period of time. All of the conduct of both parties is consistent with both parties proceeding on the assumption that they were bound by the Terms of Hire. That was certainly the case for CHEP; Ms Tadros's evidence on this issue was not challenged. 4. Detriment is self-evident and was not the subject of any challenge by Mr Bennett. 5. Accordingly, if I have erred in holding that there was a contract, I would alternatively find that PJ Nash is estopped from denying that its hire of equipment from CHEP was subject to the 2016 Terms of Hire and, in particular, that the invoices issued between February and August 2019 that are the subject of these proceedings (and the charges arising therefrom) may accordingly be claimed. The penalty defence 1. The PJ Nash pleads (at paragraph 12 of its defence, by reference to the cross-claim) that any agreement is unenforceable to the extent that it imposed charges that constitute contractual penalties both at common law and in equity. 2. The features of the charges levied against PJ Nash that are asserted to fall within this description are: 1. The actual hire of pallets and pallet floats was much less than was reflected in the invoices the subject of the claim. 2. The compensation rate charged for replacement of the pallets and charged to PJ Nash is excessive. 3. CHEP receives pallets that have been physically returned to it yet, for "a proportion" of those pallets, CHEP "must be also in receipt of either (a) pallet hire charges being charged on parties such as the defendant, or (b) compensation charges being charged on persons such as the defendant" (submissions, paragraphs 34 and 40). 1. Mr Bennett's submissions on penalty clauses consist largely of reliance upon CHEP Australia v Flynn [2019] NSWDC 614 (paragraphs 41 – 46). In those proceedings, which were heard by another judge in this court, factual findings were made at [70] as follows: "70 Mrs Flynn submits, correctly I find, that: the parties did not have equal bargaining capacity where CHEP, the subsidiary of a large corporation presented standard terms to a small family business; CHEP has not provided reliable evidence that it has formally declared that its equipment is lost as provided by clause 10(c) of the agreement; and the amount claimed is out of all proportion to the amount involved in replacing the equipment, being timber pallets of apparently simple construction using relatively inexpensive materials. I find that those matters attract the application of the test for assessing whether the charges involve a penalty component, as identified in the preceding paragraph." 1. For these reasons, the court found that CHEP's "lost equipment charge" and "ongoing hire charges" were penalties. 2. Mr Bennet endorses both the approach to this issue and the findings of this judgment, submitting that it correctly sets out the relevant principles in relation to penalty law as well as being factually comparable because it deals with the same contract with the same plaintiff. 3. While decisions of another judge of this court should be given weight due to comity, the remarks on the penalty issue (which the judgment notes at [76] was not actually pleaded) were obiter and relate to the findings of fact in that case. In addition, in the present case, evidence of the kind which was not led in CHEP Australia v Flynn is before the court, including the cost of the pallets, and this evidence was not the subject of cross-examination. 4. Mr Smith draws other aspects of the judgment to my attention, such as the statement (at [73]) that the compensatory component of damages was unproven despite there being an agreed damages clause (see Cappello v Hammond & Simonds NSW Pty Ltd [2020] NSWSC 1021 at [26] – [26]), referring me to J-Corp Pty Ltd v Mladenis [2009] WASCA 157 at [35]. He also refers to an asserted reversal of onus of proof (at [75]), contrary to principles set out in Arab Bank Australia Ltd v Sayde Developments Pty Ltd (2016) 93 NSWLR 231 at [75]. 5. It is not necessary for me to consider Mr Smith's challenges to CHEP Australia v Flynn further. The correct approach to the determination of the relevant legal principles in relation to the doctrine of penalties is to rely upon the careful analysis of these as set out by the Court of Appeal in Arab Bank Australia Ltd v Sayde Development Pty Ltd. McDougall AJ helpfully summarises the relevant principles as set out by the majority in Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28; 258 CLR 525 at [74]: "The majority judgments paid close attention to the reasoning of Lord Dunedin in Dunlop. The following propositions emerge from the majority decision: 1. Lord Dunedin's propositions were not "rules of law", but "distillations of principle" (Gageler J at [143]; compare Kiefel J at [32] and Keane J at [260]). 2.The essence of a penalty is that it is a collateral stipulation, the (or a predominant) purpose of which is to punish the borrower for breach, and thus to compel performance (Kiefel J at [29]; Gageler J at [127], [159], [166]; Keane J at [254], [259], [273]). 3.One way of testing whether the impugned stipulation is penal – intended to punish – is to inquire whether the sum that it stipulates to be payable on breach (as I have indicated, the equitable origins and continuing equitable operation of the principle have no present relevance) is to ask whether the stipulated sum is extravagant or out of all proportion to, or unconscionable in comparison with, the maximum amount of damage that might be anticipated to follow from the breach (Kiefel J at [29], [54]; Gageler J at [158] to [162]; Keane J at [221]). 4."Damage" in this sense is not limited to damages recoverable upon breach of contract, but may extend to damage, or losses, caused by the impairment of other legitimate commercial interests that were intended to be protected by the stipulation (Kiefel J at [33], [42] to [47]; Gageler J at [145], [160] to [162]; Keane J at [216], [283]). 5.The analysis is to be made at the time, and taking into account the circumstances applicable, when the contract was made; not at the time of breach; the analysis is prospective, not retrospective (or as is said in some judgments, is ex ante, not ex post) (Kiefel J at [62]; Gageler J at [169]). 6. Mere disproportion between the stipulated sum and the possible damage is not enough to indicate "penalty"; the disproportion must be such that it is unconscionable for the lender to rely on the stipulation (Kiefel J at [54], Gageler J at [164]; Keane J at [221], [240, [279])." 1. McDougall AJ added two further observations of relevance derived from Paciocco. The first is that the onus rests on the person asserting there is a penalty and the second is that the invariable nature of the penalty compared to the amount overdue or the length of delay, although it cannot be ignored, is "only weakly indicative of the character of the late payment fee as a punishment". 2. It is immediately apparent, from the recitation of the facts of the first instance judgment, that there was not merely evidence in Arab Bank in relation to penalty, but also expert evidence (at [81]). That evidence included cross-examination (at [98]). By comparison, in these proceedings, not only did PJ Nash fail to lead evidence, but there was no cross-examination of any of the CHEP witnesses on penalty-related issues. Nor is there any reference to transcript or documentation on this issue in the PJ Nash submissions. 3. What was that evidence? Mr Smith, for CHEP, sets out that Mr Trussell explained, in some detail, the basis of the Lost Equipment Compensation Amount, as set out in paragraphs 52 – 72 (CB 115 – 119). I do not need to set this out, because (apart from being asserted to be a penalty), the quantum is not challenged, but it is a complete answer to the unsupported assertion in PJ Nash's submissions that the compensation rate is "excessive" and the Lost Equipment Compensation Amount "out of all proportion to the amount involved in replacing the equipment". 4. One example will suffice. Mr Trussell stated that the replacement cost of the pallet is $36.00 (by comparison, in Chep Australia v Flynn, the evidence before the court was that the cost of making a pallet was "inexpensive"). How can a compensation charge of $36.50, which is only fifty cents more, constitute a penalty? To the contrary, it is a reasonable and modest sum. 5. Other aspects of the Terms of Hire which run counter to the argument that the contract as a whole contains terms are penalties include the following: 1. Clause 10(d) of the 2016 Terms of Hire contains an acknowledgement that the Lost Equipment Compensation Limit was a realistic pre-estimate. 2. There is a provision (clause 10(c)) for a refund of the Lost Compensation Amount if either the customer or CHEP recover possession of the pallet the subject of the claim for compensation. 3. As to the imposition of charges on an ongoing basis until the Lost Equipment Compensation is paid, there is no evidence that those charges are even high, let alone extravagant or out of all proportion to the damage from loss of the hired equipment. 4. Implicit in PJ Nash's submissions is that the pallets provided for hire by CHEP are some kind of cheap rubbish for one-off use, where there should be no obligation to take care of the hired equipment once it has been sent on its way by the hiree. That claim is, however, refuted by the careful calculations set out in Mr Trussell's affidavit. These pallets have a ten-year lifespan and are designed for multiple use. The responsibility of the hirer of any equipment of any kind to comply with the obligations of the hiring contract also needs to be given due weight. This is particularly the case with a hire system of the kind used by CHEP. 1. Another difficulty, in terms of dealing with the submissions of PJ Nash on penalties, is that Mr Bennett characterises the whole of the contract as being one containing penalty terms, as opposed to identifying with precision, not only those terms asserted to be a penalty, but how these terms operated in this fashion as a penalty on PJ Nash. 2. I am satisfied that none of the provisions in the Terms of Hire of 2016 amounted to a penalty. CHEP has led the necessary evidence in these proceedings to overcome the gaps in its case in Chep Australia v Flynn. 3. An unanswered question in this litigation was whether, if one or more of the 2016 Terms of Hire was a penalty, whether it had been a penalty in the previous Terms of Hire and, if not, why not. Similar questions arise in relation to the next issue raised by PJ Nash, namely that there were unfair contractual terms. Unfair contractual terms 1. The parties had conducted business without incident for many years prior to the introduction of new terms in 2016. What were the terms in the contract prior to 2016 that were unfair, and which new provisions in 2016 can be characterised as unfair? 2. As Mr Smith noted in his oral submissions (T 119), PJ Nash effectively impugns all of the terms of the 2016 Terms of Hire as part of its unfair contract argument, and identifies the following seven aspects of the Terms of Hire asserted to be unfair: 1. The unilateral powers of amendment on the part of the plaintiff. 2. The powers to transfer the rights and benefits to the contract on the part of the plaintiff. 3. The compensation charges being out of proportion to the value of the equipment hired. 4. The contract as a whole, but particularly by virtue of the interplay between clauses 2, 3, 4, 7 and 8, the effect of which resulted in PJ Nash being charged for the hire of equipment which it is asserted that CHEP, as well as PJ Nash, both knew that PJ Nash "no longer had in its possession, and which in all likelihood had been returned to the plaintiff". 5. The limitation on the part of PJ Nash in being able to transfer equipment off its account by virtue of the wording of clause 4(a)(2) and (3). 6. The restricted manner in which a party in the position of PJ Nash can object to matters set out in an invoice, as dictated by clause 7(f), in circumstances where the balance of equipment on an account is a floating and complicated matter to determine at any given point in time (and which depends upon the materials and documents that might be exclusively in the hands of third parties such as suppliers and customers). 7. The compounding effect of such charges, "which accumulate in the manner that they have in contractual relationship shown [sic] these proceedings". 1. Nowhere is there any reference to asserted unfair terms in the contract prior to the changes made in 2016 (although, to err on the side of caution, given the level of opaqueness of PJ Nash's submissions, I have considered these as well). What is asserted to be unfair, in general terms, is that these new terms were imposed unilaterally, imposed new restrictions on PJ Nash and were unfair because CHEP in fact knew that the pallets in question had either been returned to them or were in the hands of third parties in circumstances where PJ Nash could not obtain them. 2. Section 23 of the Australian Consumer Law (schedule 2 to the Competition and Consumer Act 2010 (Cth)) (ACL) provides: 23 Unfair terms of consumer contracts and small business contracts (1) A term of a consumer contract or small business contract is void if: (a) the term is unfair; and (b) the contract is a standard form contract. (2) The contract continues to bind the parties if it is capable of operating without the unfair term. (3) A consumer contract is a contract for: (a) a supply of goods or services; or (b) a sale or grant of an interest in land; to an individual whose acquisition of the goods, services or interest is wholly or predominantly for personal, domestic or household use or consumption. (4) A contract is a small business contract if: (a) the contract is for a supply of goods or services, or a sale or grant of an interest in land; and (b) at the time the contract is entered into, at least one party to the contract is a business that employs fewer than 20 persons; and (c) either of the following applies: (i) the upfront price payable under the contract does not exceed $300,000; (ii) the contract has a duration of more than 12 months and the upfront price payable under the contract does not exceed $1,000,000. (5) In counting the persons employed by a business for the purposes of paragraph (4)(b), a casual employee is not to be counted unless he or she is employed by the business on a regular and systematic basis." 1. Section 24 provides: "24 Meaning of unfair (1) A term of a consumer contract or small business contract is unfair if: (a) it would cause a significant imbalance in the parties' rights and obligations arising under the contract; and (b) it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and (c) it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on. (2) In determining whether a term of a contract is unfair under subsection (1), a court may take into account such matters as it thinks relevant, but must take into account the following: (a) the extent to which the term is transparent; (b) the contract as a whole. (3) A term is transparent if the term is: (a) expressed in reasonably plain language; and (b) legible; and (c) presented clearly; and (d) readily available to any party affected by the term. (4) For the purposes of subsection (1)(b), a term of a contract is presumed not to be reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term, unless that party proves otherwise." 1. Section 25 provides: "25 Examples of unfair terms Without limiting section 24, the following are examples of the kinds of terms of a consumer contract or small business contract that may be unfair: (a) a term that permits, or has the effect of permitting, one party (but not another party) to avoid or limit performance of the contract; (b) a term that permits, or has the effect of permitting, one party (but not another party) to terminate the contract; (c) a term that penalises, or has the effect of penalising, one party (but not another party) for a breach or termination of the contract; (d) a term that permits, or has the effect of permitting, one party (but not another party) to vary the terms of the contract; (e) a term that permits, or has the effect of permitting, one party (but not another party) to renew or not renew the contract; (f) a term that permits, or has the effect of permitting, one party to vary the upfront price payable under the contract without the right of another party to terminate the contract; (g) a term that permits, or has the effect of permitting, one party unilaterally to vary the characteristics of the goods or services to be supplied, or the interest in land to be sold or granted, under the contract; (h) a term that permits, or has the effect of permitting, one party unilaterally to determine whether the contract has been breached or to interpret its meaning; (i) a term that limits, or has the effect of limiting, one party's vicarious liability for its agents; (j) a term that permits, or has the effect of permitting, one party to assign the contract to the detriment of another party without that other party's consent; (k) a term that limits, or has the effect of limiting, one party's right to sue another party; (l) a term that limits, or has the effect of limiting, the evidence one party can adduce in proceedings relating to the contract; (m) a term that imposes, or has the effect of imposing, the evidential burden on one party in proceedings relating to the contract; (n) a term of a kind, or a term that has an effect of a kind, prescribed by the regulations." 1. The contract must be construed as a whole. A term will not be unfair unless all the requirements in s 24(1)(a) - (c) are satisfied and the onus is on the defendant (in relation to s 24(1)(a) and (c)), subject to s 24(4). The relevant principles are set out in ACCC v CLA Trading Pty Ltd [2016] FCA 377 at [54]. 2. PJ Nash submits that each of the elements of s 24 is satisfied because: 1. The terms "cause a significant imbalance to the rights and obligations arising under the contract" because of PJ Nash's "limited means" for control of the pallets and equipment (submissions, paragraph 18(a)). 2. The terms are not reasonably necessary to protect the legitimate interests of CHEP in that restricting the power of PJ Nash to avoid being charged for equipment no longer in its possession "is unnecessary to the sensible commercial operation of the contractual relationship" (submissions, paragraph 18(b)). 3. PJ Nash suffers a detriment in that its hands are "tied" in its ability to object to the method and manner of calculation of hire charges, which results in compounding claims for equipment "that must have most likely have [sic] been returned to the plaintiff, or hired to another customer, in effect, allowing the plaintiff to double charge for the hire of that equipment" (submissions, paragraph 18(c)). 1. PJ Nash further submits that the factors in s 25 adds a gloss to s 24 in that it sets out a "grey list" of examples of terms that may be considered as unfair, by inference permitting an aggrieved party who cannot satisfy s 24 to take refuge behind s 25. 2. The allegations made by PJ Nash would require evidence to be led in support. Essentially what PJ Nash is saying is that, although they did not return the pallets to CHEP, other third parties (whose identity is unspecified) would have done so, not only to the knowledge of CHEP, but in circumstances where CHEP was knowingly double charging for the hire of the equipment, in that it continued to charge PJ Nash while knowing that the equipment was in fact actually leased to someone else. 3. Mr Smith also points out in his submissions: 1. There is no identification of which particular clauses of the 2016 Terms of Hire are said to be unfair, beyond the suggestion that they imposed "charges", which suggests that the pleaded case in respect of unfair contractual terms is limited to charges imposed by CHEP's Terms of Hire. (I would add to this that those charges would need to be considered in light of the previous contractual terms which were replaced by the 2016 Terms of Hire and either a claim made that they were always unfair or an explanation as to why, after the 2016 Terms of Hire were provided, why they suddenly started to become unfair). If so, that is an argument that must fail in limine in the absence of evidence. If not, and PJ Nash is putting a case wider than that pleaded, that is prejudicial to CHEP in terms of meeting the case pleaded, as the result of PJ Nash's failure to identify the asserted unfair terms is that the plaintiff is deprived of the chance to lead evidence explaining why those terms were reasonably necessary (both before and after 2016, in my view) to protect its legitimate interests, and to demonstrate how this was the case prior to 2016, when PJ Nash appears to concede this problem was not occurring. 2. Even if (which I have not found to be the case) PJ Nash can establish the necessary elements to entitle it to invoke s 23, there is no basis to conclude, in terms of the evidence led and failure to cross-examine the CHEP witnesses on this issue, that any of the charges levied by CHEP in the 2016 Terms of Hire were not reasonably necessary for it to protect its legitimate interests. The evidence of the CHEP witnesses satisfied me that the ongoing hire charges and Lost Equipment Compensation Amount are reasonably necessary to protect CHEP's legitimate interests. Mr Trussell was not cross-examined on his evidence of the loss and damage that CHEP would suffer if it could not charge and recover those amounts. 3. Not only is there a failure to identify the terms asserted to be unfair (other than by the reference to "charges" referred to above) but no evidence was led by PJ Nash of actual circumstances of CHEP knowing that it was double-charging for pallets or otherwise engaged in what the Full Court of the Federal Court described as "sharp practice". The best that PJ Nash can point to is the generalised smears of the kind contained in Mr Nash's email (as set out in paragraph 23 of Mr Valeri's affidavit; see above) to the effect that CHEP must know that pallets are in the hands of third parties. No such claim was put to any of the CHEP witnesses. Nor was there any cross-examination in relation to the efficacy (or asserted lack thereof) of the steps put in place by CHEP to assist customers who got into difficulties. 1. PJ Nash's position is that any obligation for it to actually identify such clauses in some form of particularisation is "disputed" (submissions, paragraph 22). It is asserted that "the illegitimate additional charges are those which, as a cumulative effect of the contract as a whole, are charged in respect of inter alia, equipment that has been returned to CHEP or rehired to other customers of CHEP." Unfairness must be considered in terms of the contract as a whole (submissions, paragraph 24). 2. The failure to identify those clauses or to lead evidence of there being equipment returned to CHEP or rehired to other customers of CHEP means there is no factual basis for such a submission. There should be evidence of CHEP's employees knowing that CHEP was double charging in circumstances where this amounted to corporate knowledge. 3. Taking all of the above evidence into account, PJ Nash has failed to satisfy any of the elements of s 24. I am satisfied that none of the terms in the contract caused any imbalance, let alone a significant imbalance, to the rights and obligations under the contract, and that CHEP's customer assistance program meant that, far from having limited means to control the pallets and equipment, it had a series of remedies available. I am also satisfied that the terms in question (whatever these may be, but having regard to all the clauses in the contract regarding both charges and other obligations placed on PJ Nash) were reasonably necessary to protect the legitimate business interests of the plaintiff. I do not accept that the power of PJ Nash to notify CHEP of equipment no longer its possession was restricted in any way. The provisions in the 2016 Terms of Hire were reasonable and necessary for the sensible commercial operation of the contractual relationship. I am also satisfied that PJ Nash's hands were never tied in relation to the method and manner of calculation of hire charges, or that there were any inappropriately levied charges. In particular, I do not accept that there is any basis for finding that pallets "must have most likely have [sic] been returned to the plaintiff, or hired to another customer, in effect, allowing CHEP to double charge for the hire of that equipment" (submissions paragraph 18(c)). That is a submission which should have been made only if the evidence in question of such sharp practice was carefully set out. 4. I do not accept that s 25 and the "grey list" of examples provides any gloss upon s 24 but if it does, I consider that none of the examples apply in the present circumstances. 5. The defence that there were unfair terms in a small business contract accordingly fails. 6. Mr Smith also points out that, if a declaration is sought to the effect that any of the terms of the 2016 Terms of Hire are unfair contractual terms, such relief is not available from this court and can only be sought in the Supreme Court: see ss 30(3) and 71(1) of the Fair Trading Act 1987 (NSW). As I have noted in relation to my findings concerning the cross-claim, given my findings on this issue, I do not consider it necessary to address this difficult issue of jurisdiction. Unconscionable conduct 1. The defence sets out, at paragraph 12, that the charges claimed by CHEP constitute unconscionable conduct within the meaning of s 21 of the ACL. A claim of unconscionable conduct in equity (s 20) was abandoned during closing submissions. 2. The ACL sets out two prohibitions against unconscionable conduct. The first of these, s 20, prohibits unconscionability "within the meaning of the unwritten law" (equitable unconscionability) and provides a range of statutory remedies which include damages, injunctions, pecuniary penalties and banning orders for the regulators. Equitable unconscionability is generally asserted to have occurred with a stronger party knowingly exploits the special disadvantage of another. This special disadvantage may be a constitutional one, or it may be situational, in that it results from the legal or commercial circumstances in which the parties find themselves. 3. The second prohibition, generally referred to as "statutory unconscionability" (s 21), prohibits the engaging in unconscionable conduct in connection with the supply or potential supply or acquisition of goods or services. This statutory form of unconscionability is wider in scope than the equitable doctrine of unconscionable conduct, as it is framed in broad terms and includes such features as offering relief where there is a system of conduct or pattern of behaviour, whether or not the victim is identified as having been disadvantaged by the conduct or behaviour. 4. The statutory test for unconscionability was clarified by the Full Court of the Federal Court in ACCC v Quantum Housing Group Pty Ltd (2021) 388 ALR 577. Essentially, what unconscionable conduct means is conduct which in its ordinary and natural interpretation means doing what should not be done in good conscience (at [87]), and it is clear both from the facts of this case and from the facts of other decisions such as Unique International College Pty Ltd v ACCC (2018) 266 FCR 631 that the conduct in question should be seen as serious, in that the kind of conduct in question often involves dishonesty, "sharp practice" or the exercise of economic power in a way worthy of criticism. 5. The facts in Quantum Housing are a good example of the kind of conduct involved. Quantum Housing engaged in conduct which was not merely false or misleading (conduct for which the company was ordered to pay a penalty of $700,000, as well as its director being ordered to pay a personal penalty of $50,000 and being disqualified from managing corporations for three years) but also brought pressure to bear on investors with rental dwellings to terminate arrangements with their existing property managers in favour of property managers approved by quantum housing. This included issuing false claims that the existing property manager had not properly managed compliance when this was not true, hiding Quantum Housing's association with the property managers and, further, warning the investors that if they did not comply, they risked losing their NRAS incentives. 6. Importantly, the court was satisfied that Quantum Housing engaged in conduct that was unconscionable, not because it took advantage of or exploited vulnerability or disadvantage suffered by the investors, but because it engaged in deliberate systematic conduct by misusing its superior bargaining position to dishonestly mislead commercial investors. 7. Is it necessary for there to be actual dishonesty? In Good Living Company Pty Ltd as Trustee for the Warren Duncan Trust no 3 v Kingsmede Pty Ltd [2021] FCAFC 33, Good Living, which had guaranteed the obligations of the lessee who breached its lease, alleged that, by collecting the money that was the subject of the unconditional guarantee, Kingsmede had engaged in unconscionable conduct in contravention of both 20 and 21 of the ACL. 8. The Full Court held that the company had not engaged in unconscionable conduct, noting that, while Kingsmede had acted in its own interests, even though in an uncompromising way, it had nevertheless acted openly and honestly in the relevant negotiations, and that the responsibility for looking after the interests of the other party lay with others in the transaction, not with Kingsmede: "The respondents acted in their own interests, without sharp practice, honestly and openly, even if in an uncompromising way. If it was anyone's responsibility to look after the interests of those providing the security for Chop 1's bank guarantee it was those controlling Chop 1's affairs during the negotiation." 1. The conduct asserted to be unconscionable is identified in paragraph 57 of PJ Nash's submissions as follows: 1. Conduct which Mr Bennett describes as "potential double charging" for equipment hire, in that PJ Nash is being charge for equipment that is known to not be in its possession, and which in all likelihood has either been transferred back to the Plaintiff, or transferred to another account and for which charges are being levied. 2. Representations as to the maximum number of pallets that can be removed from an account as being limited to 4500, when this is not the case, in the sense that there is no contractual prevention of a complete reduction of the pallets on an account to zero. 3. In reference to the compensation charges, charging amounts that are disproportionate to the genuine pre-estimate of its loss, as found in CHEP Australia Ltd v Flynn. 4. A "suggestion" by a representative of the Plaintiff that to rectify the account balance issues, that PJ Nash should consider buying pallets on the "black market", despite doing so being an unlawful activity. 1. I will deal with each of these in turn. Potential double charging 1. The reference to "potential" in relation to the claim of double charging is, as already noted, because there is no actual evidence of such double charging. Nor is there evidence of actual instances of CHEP double charging, or charging PJ Nash for pallets that had actually been returned to CHEP. As Mr Smith points out in his submissions (at paragraph 108), the "potential" for double charging of this kind is at best a speculative possibility which is incapable, without evidence, of rising to the level of a very serious finding such as statutory unconscionable conduct. 2. In addition, as Mr Smith points out in his submissions at paragraph 90, CHEP can only derive income from a customer if the equipment in question is recorded as being sent to a particular customer and charged for on that customer's account. If the customer then sends the pallet on to a third party and does not accurately transfer the equipment to the other customer on the system, CHEP can only charge the customer to whose account the pallet is recorded; it cannot charge both PJ Nash and the new customer. PJ Nash's expectation that any third party physically receiving PJ Nash's pallets (where PJ Nash has failed to note this transfer to the third party on it own system) will voluntarily do PJ Nash's work for them and account to CHEP for the pallets by adding them to their own account is contrary to realistic commercial practices. Mr Trussell's explanation at paragraphs 59 - 61 of his affidavit of this procedure (CB 116) confirms this. A "ceiling" of 4,500 returnable pallets 1. This is a reference to the negotiations between the parties which led to a reduction of the number of pallets allocated to the PJ Nash account (T 17; CB 1314). How is this asserted to be a "ceiling" and how was this unfair? 2. Mr Nash, did not give evidence that this was a "ceiling". He agreed that it was a negotiated reduction, although attempting to claim that it had not been negotiated with his company but with a "subsidiary": "Q. You're aware I take it that Anak(?) paid that amount of $67,500 in about March 2019? A. Yes. Q. You are aware that after that was paid 4,500 pallets were removed from PJ Nash's CHEP account, correct? A. Yes. Q. Now when the company received this invoice for compensation for 4,500 pallets the company didn't say no-one from the company including yourself wrote to CHEP and said the company's not liable for those lost pallets because we're not bound by the terms of hire did they? A. I would have if I knew that. No, no I done a deal, I did a deal CHEP representative for 4,000 - well they, they said I could take, take like they could compensate four and a half thousand pallets off the account. Q. But you accepted, didn't you, that the ..(not transcribable).. for the pallets on its account, correct? A. Yeah, I'd been paying for, for pallets but it's like I said earlier we never had an account as such as in - yeah. Q. Well, if you never had an account, how did you think the 4,500 pallets were related to your company? A. The ones that we hired through the subsidiary that wasn't a party to the as far as I know PJ Nash wasn't a party to the - I never signed any documents into a ..(not transcribable).. party or a three-way contract with CHEP, the old company and myself. Q. But you didn't say that to CHEP at the time they were charging you for lost pallets, did you? A. Why would I? Q. Well if you're of the view that there was no obligation owed by your company to CHEP wouldn't that have been a matter to raise to CHEP as to why you weren't liable for these pallets? A. I was receiving pallets and we were, yeah, we were operating under someone else's account." (T 80 - 81) 1. Mr Nash acknowledged at T 93: "Q. Yes, and you already agreed before that after you paid that amount the pallets were removed from the company's account, correct? A. Yeah but that didn't stop the impact that it had previously. Q. But once that had been paid there was no further compensation amount that had to be paid in relation to those 4,500 pallets, was there? A. No. Q. That was paid on about 8 March 2019, so when you refer in paragraph 72 to receiving an email on 20 March-- A. Yep. Q. --it's clear isn't it that, that was dealing only with the outstanding invoices that the company hadn't paid, correct? A. Yes." 1. Mr Valeri's evidence was that the figure of 4,500 was arrived at during negotiations and that this figure represented "whatever the loss was" (T 37), not some kind of maximum figure. It was not put to him that this was some kind of "maximum" rebate amount possible. 2. I have carefully reviewed the hundreds of pages of material set out in the Court Book. The process of negotiation of this sum is set out at CB 1307 - 1310. Mr Valeri wrote to Mr Johnson and Mr Scott saying: "Philip Nash Owner of Westmore's rang Simon Johnson wanting help. What's required: 1. Comp rate for pallets. 2. Approx loss of 4300 pallets. 3. Maybe payment plan. 4. FMA signature - Perce to get. 5. $1.10 for crates into ALDI - See below Hieu pricing carton conversion tool." (CB 1310). 1. Nowhere is there any reference to a maximum number or a ceiling. The figure of 4,300 appears to have been initially suggested and then increased to 4,500. There is then an email sent from Harsha Vallabhabebi of CHEP to Mr Valeri of CHEP, in response to his proposal of the same date on 21 December 2018, saying CHEP is "ok with 4 weeks of relief on 4500 pallets" (CB 1308). Harsha wrote again to Mr Valeri on 14 January 2019 stating that the credits approved by Mr Valeri were "approved by me" and asking Mr Valeri to "work with Scott [Scott Dunlop of PJ Nash] on working out the calcs [sic]" (T 1307). 2. There is no evidence that the maximum number of pallets that could be written off was 4,500. The suggestion in the written submissions that a ceiling was put on during the negotiations is not supported by any evidence and was not put to Mr Valeri. Given the total absence of any factual basis, this claim cannot be made out. 3. Scant attention was paid to this proposal in the defendant's written submissions, in terms of providing transcript or Court Book references. It took some time to track down the references to "4,500" and to work out that this figure was the one the subject of the assertion. Genuine pre-estimate of loss 1. For the reasons set out in more detail above, I have accepted the evidence of the CHEP witnesses that the figures in question represent a genuine pre-estimate of loss and are not a penalty. The "black market" claim 1. This issue is well described by Mr Smith as a "distraction" (submissions, paragraph 111). I do not accept that a CHEP employee suggested that PJ Nash should consider buying pallets on the black market. Both Ms Tadros and Mr Trussell said that such conduct was illegal. It would also be contrary to CHEP's interests. Even if such a comment had been made by an employee, and in some way bound CHEP (neither of which I accept) it would still not be evidence of unconscionability. Conclusions concerning unconscionable conduct 1. Many of the submissions and much of Mr Nash's evidence were predicated upon the claim that CHEP knew that PJ Nash did not have the pallets in its possession and that in knowing this and still charging for them, CHEP was acting unconscionably. 2. I do not accept this submission because: 1. There is a lengthy history of satisfactory dealing between the parties prior to 2016 and correspondence tendered by CHEP shows that complaints were actioned and resolved (albeit in 2007 and 2008). PJ Nash did not produce any emails or letters of complaint which were ignored. 2. Mr Nash's late entry into the dispute in December 2018 (CB 85) meant that errors he asserted had happened in terms of CHEP processing the charges (which he claimed was "the most significant or main reason" for the sudden increase: T 92) could not be resolved before that time. If there were errors, and these errors were the main reason for the increase, this does not amount to unconscionability. Mr Nash acknowledged that until the problem was identified and raised with CHEP, nothing could be done to fix this (T 90). 3. The main cause of missing pallets, as Mr Nash noted, was the conduct of Aldi, and I have accepted the evidence of the CHEP witnesses that for a series of commercial as well as practical reasons, CHEP could not act as arbiter of disputes between customers. I am not satisfied on the evidence that CHEP was aware of the problems but even if CHEP was, it was under no obligation to descend "into the fray" (to use Mr Smith's words in paragraph 115 of his submissions) and sort out PJ Nash's problems with Aldi. 4. I have accepted the evidence of Mr Valeri that he was not aware of the actual number of pallets at PJ Nash. His reference to a stocktake resulting in a figure of 4,500 pallets was a figure which came from PJ Nash, not from any source of information available to Mr Valeri (T 38). Mr Valeri had hundreds of customers to look after and did not have this kind of detailed knowledge of PJ Nash. What is more, he said (and I accept) that a number of his other customers had similar balances. 1. Contrary to acting unconscionably, I am satisfied that when CHEP became aware of PJ Nash's equipment balance problems in 2018, it acted promptly and did everything it reasonably could to assist PJ Nash. This included agreeing on a discounted compensation rate for the 4,500 pallets estimated by PJ Nash to be in third party hands, giving credit for these, offering a payment plan and generally conducting the negotiations reasonably. 2. Some regard needs to be had to the size and structure of CHEP and to its expectation that customers who hired their goods would behave in a commercially businesslike manner. Even if some of the CHEP employees did realise that there were problems, that does not equate with knowledge for CHEP: Commonwealth Bank of Australia v Kojic (2016) 249 FCR 421 at [112]. 3. Finally, concepts of unconscionability need to be considered in light of the factors listed by Mr Smith at paragraph 121 of his submissions, which include the relevant clauses of the Terms of Hire, the procedures in place for customers with problems, the extensive efforts made by CHEP to help when the problem was finally identified in 2018 and PJ Nash's own managerial incompetence in terms of knowing about the problem and doing nothing. 4. If the unconscionable conduct claim goes only to the ongoing hire charges and the Lost Equipment Compensation Amount (which PJ Nash's pleadings seems to define as being the case), that creates further difficulties, as the reasons for these being singled out are unclear. That claim of unconscionability as a defence must fail. If, as I suspect is the case, the claim is made in relation to unconscionability of the whole contract, the evidence relied upon by PJ Nash, which ranges from generalised assertions to unproven allegations, falls far short of establishing unconscionability and would also fail. An unpleaded defence? 1. Although not pleaded, there is a reference to "economic duress" at paragraph 46 of PJ Nash's submissions. 2. I assume, from the absence of any reference to duress Mr Bennett's oral submissions, that any such claim is not pressed, noting also his abandonment of the claim for unconscionable conduct in equity. 3. If that is not the case, I would observe that, for economic duress to be established, the amount of pressure required must be so coercive of the will that consent should be treated as vitiated, which is not supported by the facts as I have found them. Conclusions concerning the defences 1. All of the defences have failed and I now consider the issue of quantum. The quantum of CHEP's claim 1. At the date of the hearing the quantum of CHEP's claim was $376,793.54. 45.64. 2. The first component is $103,413.51 of outstanding invoices between 16 February 2019 and 17 August 2019. The invoices are for: 1. CHEP wooden pallets (product code 10001), which are described on the invoices as "CHEP Pallet Aust". 2. CHEP Plastic Display Pallets (product code 11201), which are described on the invoices as "Retail Display (D) Pallet". 3. Black Foldable Produce Crates (product code 11000), which are also known as Reusable Plastic Containers and are described on the invoices as "Industry Standard" and "Industry Standard Foldable Crate". 1. The quantity of each product stated in each invoice is reflected in Movement Analysis Reports for each product which show the quantity of each type of equipment recorded to PJ Nash's CHEP account over time. 2. CHEP sent a letter of demand to PJ Nash on 19 August 2019 demanding payment of all outstanding invoices and requesting the return of the 1,429 timber pallets that were then recorded to PJ Nash's account by 26 August 2019, failing which they would be deemed to be lost. This letter was sent by email to Mr Nash. 3. The second component is $202,169.88 in ongoing hire charges for timber pallets. From 19 August 2019 to 5 March 2020, there were 1,429 timber pallets recorded to PJ Nash's account. From 6 March 2020 to 3 September 2020, there were 1,413 timber pallets recorded to PJ Nash's account. 4. From 4 September 2020 to date, there have been 1,401 timber pallets recorded to PJ Nash's account. 5. In addition to being stated in each invoice, CHEP's standard prices have been available to PJ Nash on the Portal at all relevant times. 6. The ongoing hire charges are continuing to accrue at $244.03 per day. 7. The third component is $51,136.50, being the Lost Equipment Compensation Amount for 1,401 pallets. CHEP's standard compensation rates have been available to PJ Nash on the Portal at all relevant times. 8. The fourth component is $20,073.65 of interest on the outstanding invoices. The interest is continuing to accrue at $22.08 per day. The cross-claim 1. PJ Nash joins issue with the defence and seeks: 1. Declarations that illegitimate additional charges were contractual penalties. 2. Declarations that the illegitimate additional charges were unjust and unconscionable conformably with the Australian Consumer Law (but not, it would appear, at equity, despite the statements to the contrary in paragraph 5(b) of PJ Nash's submissions in reply). 3. Damages of an unspecified quantum. 4. Restitution for payments made and as money had and received. 5. Interest and costs. 1. In view of my findings of fact and the manner in which the cross-claim has been presented, I propose to deal with the cross-claim only briefly. 2. Mr Bennett sets out, at paragraph 80 of his submissions, that the defendant/cross-claimant asks for "judgment for the Cross-claimant on the Cross-Claim", without any attempt to define what that amount would be. The cross-claim impugns invoices dating back to 2014 up to February 2019 but has neither put those invoices into evidence, nor identified how much it paid, let alone set out how much of what it paid is asserted to be illegitimate. In his submissions in reply, Mr Smith notes that what the defendant/cross-claimant is doing is inviting the court to find on the balance of probabilities that the entire claim of CHEP is offset, a submission he describes as "startling" (submissions, 14 February 2022, paragraph 36). 3. What little specificity there is in the cross-claim is itself unreliable in terms of evidence. For example, the reference to a figure of "126" is drawn from documentation about average pallet balance, not the actual balance of unreturned pallets in the cross-claimant's possession. I agree with Mr Smith's submission that this figure of 126 does not provide any basis upon which estimates can be made, and that for me to attempt to do so (in the absence of some kind of estimate from the defendant/cross-claimant itself) would be no more than speculation and guesswork. 4. What appears to be sought is that an account would now be ordered, which Mr Smith (T 130) points out would prolong these proceedings by months, increasing the costs to the parties and effectively allowing further evidence to be adduced in circumstances where there were guillotine orders made by the List Judge to ensure that all evidence would be heard and the subject of determination in these proceedings. No such relief was claimed in the pleadings and it is too late to raise this proposal now. 5. The other form of relief sought is a declaration. I asked the parties for further submissions as to whether this court has the jurisdiction to make orders of this kind under the Australian Consumer Law as I was troubled that the power to make them may be restricted to the Supreme Court. As noted earlier in this judgment, I do not propose to make any orders in favour of the cross-claimant in any event, this is not an issue about which I need to make findings. Concluding remarks 1. CHEP is entitled to judgment for $376,793.54 together with ongoing hire charges and interest accruing at $244.03 and $22.08 per day respectively. The cross-claim is dismissed. 2. I have given the parties liberty to bring in Short Minutes of Order reflecting the mathematically agreed total of these charges. 3. I was not addressed on interest or costs and grant liberty to apply. Order: 1. Judgment for the plaintiff, with liberty to the parties to bring in Short Minutes of Order reflecting the mathematically agreed judgment sum. 2. Cross-claim dismissed. 3. Costs and interest reserved, with liberty to apply. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 28 June 2022