Supreme Court New South Wales Medium Neutral Citation: In the matter of DCM Solar Pty Limited (in liquidation) [2013] NSWSC 323 Hearing dates: 14, 15 and 19 March 2013 Decision date: 10 April 2013 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Parties to bring in short minutes of order to reflect judgment. Parties to be heard as to costs. Catchwords: CORPORATIONS - Winding up - Liquidators - Appeal against rejection of a proof of debt - Whether debts were incurred by a company other than the Plaintiff - Relevance of other rights acquired by Plaintiff. CONTRACT - Parties - Identification of the parties to the contract to be determined in accordance with the objective theory of contract - Whether a change in contracting entity - Whether purchase order documents referring to different entities amount to a change of contracting party - Whether a company had contracted as agent for another company. Legislation Cited: Corporations Act 2011 (Cth) s 1321 Corporations Regulations 2001 (Cth) r 5.6.54 Cases Cited: - Australian Tallow and Agri-Commodities Pty Ltd v Malaysia International Shipping Corporation [2001] NSWCA 16; (2001) 50 NSWLR 576 - Australian Trade Commission v Goodman Fielder Industries Ltd (1992) 36 FCR 517 - British Westinghouse Electric & Manufacturing Co Ltd v Underground Electric Railways Company of London Ltd [1912] AC 673 - El-Kazzi v Kassoum [2009] NSWSC 99 - Fabre v Arenales (1992) 27 NSWLR 437 - FloMin Inc v Australian Raw Materials Corporation Pty Ltd (formerly named Tennant Ltd) (voluntary admins apptd) [2011] NSWSC 585 - Highfield Investments Pty Ltd v Commercial & Residential Developments (SA) Pty Ltd (No 2) [2012] SASC 191 - Jones v Dunkel (1959) 101 CLR 298 - Macourt v Clark [2012] NSWCA 307 - Mediterranean Olives Financial Pty Ltd & Ors v Lederberger & Ors [2011] VSC 301 - Montgomerie v United Kingdom Mutual Steamship Association Ltd (1891) 1 QB 370 - Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 - Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154 - Re Jay-O-Bees; Rosseau v Jay-O-Bees [2004] NSWSC 818; (2004) 50 ACSR 565 Re Monroe Schneider Associates (Inc) and Anor v No 1 Raberem Pty Ltd (1991) 33 FCR 1 - Ruthol Pty Ltd v Tricon (Australia) Pty Ltd [2005] NSWCA 443; [2005) 12 BPR 25,523 - Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603 - Seiwa Australia Pty Ltd v Beard [2009] NSWCA 240 - Tanning Research Laboratories Inc v O'Brien [1990] HCA 8; (1990) 169 CLR 332; (1990) 1 ACSR 510 - Teheran-Europe Co Ltd v S T Belton (Tractors) Ltd [1968] 1 All ER 585; [1968] 2 QB 53 - Teheran-Europe Co Ltd v S T Belton (Tractors) Ltd [1968] 2 QB 545 - Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 Category: Principal judgment Parties: Soanar Pty Limited (Plaintiff) Geoffrey Trent Hancock (First Defendant) Michael Charles Hird (Second Defendant) Representation: Counsel: R.J. Weber SC/J. Hutton (instructed by Aitken Lawyers) C. Harris SC (instructed by Colin Biggers & Paisley) Solicitors: Aitken Lawyers (Plaintiff) Colin Biggers & Paisley (Defendant) File Number(s): 2012/185393 Judgment 1By Originating Process filed on 13 June 2012, the Plaintiff, Soanar Pty Limited ("Soanar") seeks an order under s 1321 of the Corporations Act 2001 (Cth) and reg 5.6.54 of the Corporations Regulations 2001 (Cth) revoking the rejection of its Proof of Debt dated 10 May 2012 ("Proof of Debt") in the liquidation of DCM Solar Pty Limited (in liquidation) ("DCMS") and admitting that Proof of Debt. 2Section 1321 of the Corporations Act permits a person aggrieved by an act, omission or decision of, relevantly, a liquidator, to appeal to the Court in respect of that decision and allows the Court to confirm, reverse or modify that act or decision and make such orders and give such directions as it thinks fit. Regulation 5.6.54 of the Corporations Regulations in turn provides that a person may appeal against the rejection of a formal proof of debt or claim within the time specified in the notice of the grounds of rejection or such further period as the Court allows. There was no contest between the parties as to the applicable principles in an appeal from a liqudator's decision whether to allow a proof of debt. Such proceedings involve a hearing de novo, in which the liquidator may rely on any ground on which the company might have defended the claim brought by the creditor: Tanning Research Laboratories Inc v O'Brien [1990] HCA 8; (1990) 169 CLR 332; (1990) 1 ACSR 510; Re Jay-O-Bees; Rosseau v Jay-O-Bees [2004] NSWSC 818; (2004) 50 ACSR 565 at [34], [47]. 3The Proof of Debt was quantified by reference to outstanding invoices as at 10 March 2011 and 14 April 2011, namely $3,507,294.27 USD and $342,114.84 AUD, converted as $3,967,439.40 AUD (including GST) on the basis of contemporaneous exchange rates. The Proof of Debt made an allowance for recovery of stock with an invoiced value of $573,869.43 AUD (ex GST), which was estimated to be saleable for significantly less than that amount. The summary of the amount claimed was as follows: Invoiced debt $3,606,759.48 Less amount for re-sold stock Diabury Holdings Pty Ltd ($22,727.27) Clayton Church Homes ($70,005.00) ($92,732.27) Plus offsets - $20,000.00 TOTAL LOSS $3,535,027.37 The reference to "offsets" was to certain offsets against resales of recovered stock, being the costs of locating and retrieving that stock (including legal costs), warehousing costs and costs of repackaging, estimated to be $20,000, and said to continue to accrue at an average rate of approximately $2,000 per month, which Soanar contended was recoverable against DCMS pursuant to the contractual arrangements between the parties. 4On 30 May 2012, the Liquidators gave notice disallowing the whole of the Proof of Debt, on the grounds that (Ex TM1, 80): "Public examinations, partly to investigate whether the Soanar claim ought to be admitted, have not been completed. It appears that the debts which are the subject of the claim were incurred by DCM Green Pty Ltd (in liquidation) rather than the Company. It appears that Soanar has recovered possession of significant amount of stock, and obtained assignments of various rental agreements relating to other stock, to which debts relate." 5The first of those grounds of disallowance was not the subject of further submissions before me. It appears that public examinations have been conducted but there was no evidence of their result before me and the Liquidators have not sought to rely on any matters that emerged from them to support the disallowance of the Proof of Debt. I will address the second and third grounds of rejection of the Proof of Debt below. Application of the objective theory of contract to identification of the parties to the contract 6The primary issue agitated before me was the second ground of rejection of the Proof of Debt, whether the debts which were the subject of the claim were incurred, from mid 2010, by another entity, DCM Green Pty Limited ("DCMG") rather than by DCMS. In order to address that issue, I will first set out the relevant legal principles and then apply them to the dealings between DCMS and Sonar and, to the extent relevant, DCMG. 7It was common ground between the parties that Soanar had the onus of establishing that DCMS was the relevant contracting party and that the identification of the parties to the contracts was to be determined in accordance with the objective theory of contract. The essential issue is "what each party by words and conduct would have led a reasonable person in the position of the other party to believe" and relevant matters include the text of documents passing between the parties; the surrounding circumstances known to the parties; the purpose and object of the transaction and its genesis; and the background, context and markets in which the parties were operating: Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 at [22]. The principle of objectivity was in turn summarised by a unanimous High Court in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40] as follows. "This Court, in Pacific Carriers Ltd v BNP Paribas, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction." 8In Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603, Campbell JA observed: "For the purpose of deciding whether a contract has been entered, or what construction it bears, the common intention that the court seeks to ascertain is what is sometimes called the "objective intention" of the parties. That is the intention that a reasonable person, with the knowledge of the words and actions of the parties communicated to each other, and the knowledge that the parties had of the surrounding circumstances, would conclude that the parties had, concerning the subject matter of the alleged contract: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 461-462, [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179, [40]; Investors Compensation Scheme Ltd v West Bromwich Building Society [1988] 1 All ER 98 at 114-115; 1 WLR 896 at 912-913; Taylor v Johnson (1983) 151 CLR 422 at 429; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 549-550. There is also authoritative recognition that a factor to be taken into account in deciding whether a contract has been entered and if so what are its terms is "the purpose and object of the transaction": Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 462, [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179, [40]. In Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 462, [22] the joint judgment of Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ recognised the appropriateness of taking into account the purpose and object of the transaction." 9In Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154, the Court of Appeal had to consider a case involving a question of identification of the parties to a contract, which primarily turned upon which entity was trading under a particular business name. Campbell JA (with whom Beazley JA agreed, and Basten JA agreed with one qualification to which I will refer below) referred to Ryledar Pty Ltd v Euphoric Pty Ltd and observed that "[I]dentification of the parties to the contract must be made in accordance with the objective theory of contract". Campbell JA also referred (at [59]) to authority that subsequent communications cannot be looked at as an aid to construction of a contract, but can be looked at as an aid to deciding whether a contract has been entered into at all. His Honour noted that there was a question, in that case, whether subsequent communications could be considered to determine whether the contract was entered into with one of two parties, which was no different in substance to a question whether there was a contract entered into with the first party; however, his Honour did not consider it necessary to form a view about the correctness of that proposition, because review of subsequent communications would not have led to any different conclusion. Basten JA reserved his position as to that question. In the present case, it is not necessary to have regard to any communications after the date of the meetings and orders on which the Liquidators rely, which were prior communications so far as the orders and debts in issue in the Proof of Debt are concerned. 10The objective approach to the identification of the contracting parties was also adopted by the Court of Appeal, having been treated as common ground by the parties, in Seiwa Australia Pty Ltd v Beard [2009] NSWCA 240 at [179] ff and by Ward J in El-Kazzi v Kassoum [2009] NSWSC 99 at [20]. In FloMin Inc v Australian Raw Materials Corporation Pty Ltd (formerly named Tennant Ltd) (voluntary admins apptd) [2011] NSWSC 585 at [20] Einstein J referred to Pethybridge and Ryledar in observing that identification of the parties to a contract must be made in accordance with the objective theory of contract. His Honour observed at [20]-[22] that: "Identification of the parties to [the contract in issue] must be made in accordance with the objective theory of contract [Pethybridge v Stedikas Holdings Pty Ltd (2007) Aust Contract R 90-263, [2007] NSWCA 154 at [54]; Ryledar Pty Ltd v Euphoric Pty Ltd (20070 69 NSWLR 603; [2007] NSWCA 65 at [262]-[266]. What matters is "what each party by words and conduct would have led a reasonable person in the position of the other party to believe" [Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40]]. The terms of the contractual arrangement are to be determined objectively, by reference to the text of any documents passing between the parties, the surrounding circumstances known to the parties and the purpose and object of the transaction and its genesis, and the background, context and markets in which the parties were operating [Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40]. The court determines the parties to the contract by asking what a reasonable observer would conclude from the objective evidence of the communications that led to the entry into the contract, together with the background facts known to the parties [Pethybridge v Stedikas Holdings Pty Ltd (2007) Aust Contract R 90-263, [2007] NSWCA 154 at [54] (Campbell JA)]." 11In Mediterranean Olives Financial Pty Ltd & Ors v Lederberger & Ors [2011] VSC 301 at [5], Pagone J referred with approval to the observation in Cheshire and Fifoot's Law of Contract, 9th Australian Ed, 2008 [7.2] note that the answer to the question "who are the parties" to a contract "may be a matter of ascertaining the objective intention from all the circumstances". The dealings between the parties 12I turn now to the dealings between the parties and objective circumstances relevant to the identification of the parties to the debts on which Soanar relied in the Proof of Debt. 13DCMS was incorporated under the name DCM Sanctuary Pty Limited and changed its name to DCM Solar Pty Limited from 14 October 2009. DCMS's business, in its capacity as trustee of the DCM Sanctuary Unit Trust, was the installation of solar power systems, primarily for retirement village residents, as to which applications for subsidies were initially made to the Federal Government under the Solar Homes Community Project ("SHCP"). DCMG was incorporated in February 2010 and two of the three directors of DCMS were directors of that entity. 14Soanar entered into arrangements to supply solar panels and associated equipment to DCMS in early September 2009, which contemplated the supply of those goods on credit. An account application was lodged at that time by DCMS as trustee for the DCM Sanctuary Trust and the stated Australian company number was that of DCMS. The directors of DCMS were stated as Mr Christopher Baynes and Mr Mark Majoribanks; there was no reference to another director of DCMS at that time, Mr Arthur Koumoukelis. There does not seem to be any doubt that the parties to the relevant dealings were then Soanar and DCMS. 15In late March 2010, DCMS lodged a further Application for Credit Account which incorporated Soanar's standard terms and conditions ("March 2010 Terms"). The relevant terms and conditions are signed by Mr Koumoukelis and Mr Moldrich on behalf of DCMS and Mr Koumoukelis and Mr Baynes are identified as the directors of DCMS. The Application provides that the buyer "agrees to be bound by the Seller's Term and Conditions of Sale attached" and requires an acknowledgment that the buyer has read and understood those terms and conditions of Sale. 16Clause 3.1 of the March 2010 Terms provided that: "[Soanar] may require the buyer to place written orders for [Soanar's] goods. All quotations given and orders accepted by [Soanar] are given or accepted by [Soanar] subject to these terms and conditions, and to the exclusion of all other terms and conditions. A contract will be made only upon the acceptance of an order in writing by [Soanar], which may be by supply of all or part of the goods ordered." This clause had the effect that contacts between Soanar and DCMS were formed, subject to the March 2010 Terms, on the lodgement of written orders by DCMS (or, if the Liquidators' case were accepted, DCMG in the later period) which were accepted by Soanar. On that basis, as Soanar points out, a quotation issued by Soanar was in the nature of an invitation to treat; a purchase order placed by DCMS (or, on the Liquidators' case, DCMG) was a contractual offer; and a contract was formed if a purchase order was accepted by Soanar, including by supply of the relevant stock. I do not understand the Liquidators to contest that analysis. Clause 9 of the March 2010 Terms in turn contained a retention of title provision. The March 2010 Terms also included a guarantee by the directors of DCMS in respect of debts incurred by DCMS, although no claim on that guarantee was in issue in these proceedings. Mr Koumoukelis fairly accepted in cross-examination that the credit application and terms and conditions gave rise to a reasonably formal and documented arrangement for dealings between DCMS and Soanar (15.3.13, T110-111). 17Mr Clune, who was then a sales representative working with Soanar and was responsible for the DCMS account, gave evidence of the usual procedure for sale of solar kits by Soanar to DCMS (Clune affidavit [5]), namely that DCMS sent a request for the supply of stock by telephone or email; Soanar then issued a quotation which normally described the goods, quantity and price or prices and estimated delivery times; DCMS then sent a purchase order to Soanar, usually as an attachment to an email; and, once a purchase order was received and, if Soanar was in a position to meet the order, it would accept the order and deliver the stock in one or more deliveries and invoice DCMS for the relevant goods. Purchase orders were issued by DCMS (or, on the Liquidators' case, by DCMG in the latter period) in two forms (Ex P1). One form of purchase order has a logo with the words "DCM Solar" in the top right hand corner and company details referring to DCM Sanctuary (the former name of DCMS) and the ACN of DCMS in the bottom right hand corner. The other form of purchase order also has a logo with the words "DCM Solar" at the header and footer of the invoice and the words "Invoice to: DCM Solar Pty Ltd..." in the top right hand corner. DCMG's business and the mid year lunch and dinner 18Mr Harris, who appeared for the Liquidators, made clear in oral submissions that the Liquidators contend that the claimed change in contracting parties, by which DCMG commenced dealing with Soanar in place of DCMS, took place from mid-2010 (19.3.2013, T144). The Liquidators rely on the fact that subsidies were only paid under the SHCP for systems installed by 30 July 2010 and contend that, by mid-2010, DCMS was completing the installations for which it had received approval and preparing to wind down its business, and DCMG thereafter dealt with Soanar in place of DCMS, or alternatively DCMS dealt with Soanar from that time as disclosed agent for DCMG. On the other hand, Soanar contends that, although equipment supplied by Soanar ultimately found its way to DCMG, the arrangements between DCMS and DCMG by which that occurred could not affect Soanar's rights, which arose from the invoices issued by Soanar to DCMS in response to purchase orders given by DCMS. 19The Liquidators rely on the minutes of meetings of directors of DCMS in the latter part of 2010, which were admitted without objection and which contemplated completion of the SHCP installations, termination and winding up of the DCM Sanctuary Unit Trust and winding up of DCMS following the termination of the SHCP. However, that material evidences the subjective intention of DCMS and is not relevant to the identification of the parties to the relevant contracts unless that intention is shown to have been communicated to or known to Soanar. The Liquidators also rely on a copy of a business plan of DCMG dated June 2010. The DCMG business plan indicated that the business model of that entity was to rent solar equipment for no upfront cost to retirement village residents and referred to an exclusive distribution agreement with a listed company which manufactured the relevant panels. That appears to have been a reference to a Chinese entity rather than to Soanar. 20The Liquidators contend that a change in the structure of the business to introduce DCMG was explained by representatives of DCMS and DCMG to representatives of Soanar during a business lunch and business dinner held in mid 2010, so as to vary the terms on which Soanar dealt with DCMS, with effect that orders placed by DCMS after that date should be treated as in reality placed by DCMG. The Liquidators relied on the evidence of Mr Moldrich, who was the Financial Controller of DCMS from January 2010 until December 2010, and was also the Financial Controller of DCMG until December 2010. Mr Moldrich gave evidence of a lunch at a beer café and a dinner at an Italian restaurant with representatives of Soanar, which were at least partly social gatherings, in mid-2010 (Moldrich affidavit, 17.11.12). Mr Moldrich' s evidence was that Mr Clune, or one of the other representatives of Soanar, said at one of those functions words to the effect that: "We wanted to express our gratitude for the business we got from DCM during the SHCP and we hope to continue to do business together profitability with the new venture." Mr Clune denied that anyone said at that meeting that a new entity or new company would be submitting purchase orders to Soanar for the supply of solar kits and accessories. Soanar's Marketing Manager, Mr Matthew Hantzipavlis, denied, in his affidavit dated 16 November 2012, that he was informed at the lunchtime meeting that a new company, DCMG, existed and also did not recall Mr Clune saying the words attributed to him in Mr Moldrich's affidavit. The weight that can be given to Mr Hantzipavlis' evidence is substantially reduced by the fact that, as his cross-examination demonstrated, his recollection of events is very poor. 21There seem to me to be several difficulties with the Liqudators' reliance on these meetings and this conversation to establish a change of contracting entity from DCMS to DCMG. First, Mr Moldrich acknowledged in cross-examination that he could be mistaken that this matter had been discussed at the relevant business lunch and business dinner. Second, even if there was a reference to a "new venture" at the lunch at the beer café or dinner at the Italian restaurant, it does not seem to me that the objective observer would understand that to refer to a substitution of DCMG for DCMS in dealings with Soanar, as distinct from, for example, the anticipation of new projects to be undertaken by DCMS after the winding down of the SHCP. I do not accept that any agreement was reached at these meetings that Soanar would in future deal with DCMG rather than DCMS, so as to give rise to a variation of the relevant contract or the creation of new contracts with DCMG rather than DCMS. 22Mr Moldrich also gave evidence that, in mid-2010, he submitted a credit application for DCMG to Soanar but was told that the application had been refused, and then submitted an application to Soanar for an increase in DCMS's credit limit (Moldrich affidavit, 12.3.13, [7]). The Liquidators did not tender a copy of that credit application and did not produce it in response to a call for it. Soanar led evidence that it had not located such an application despite extensive searches (Maccallum affidavit, 13.3.13 [5]-[8]) and Mr Moldrich accepted in cross-examination that that he may have been in error about whether the application was made (15.3.13, T128-129). On balance, I am not satisfied that application was made. Even if that application were made and declined by Soanar, it does not seem to me to support the inference which the Liquidators seek to draw from it, namely that dealings between Soanar and DCMG (which had been approved for credit) after that point should be treated as being in reality dealings between DCMG and DCMS. Indeed, it seems to me to support the contrary inference; it is difficult to see how, on the application of an objective theory of contract, a party's conduct in continuing to provide credit for purchase orders given in the name of DCMS, and accepted on that basis, could be treated as amounting to dealings with DCMG for which credit had been refused. The 28 June email 23The Liquidators also relied on an email sent on 28 June 2010 from Ms Belinda Goman, the Operations Manager of Soanar, to other employees of Soanar including Messrs Hantzipavlis and Mr Clune, which contained the word "DCM?" at the bottom of the email. Mr Harris put in cross-examination to, inter alia, Mr Clune that the word "DCM?" indicated a query on Ms Goman's part as to whether she was dealing with DCMS or DCMG. It is not self-evident why that email is relevant to the identification of the parties to the contract so far as it evidences only the subjective intention of Soanar. In any event, I do not read that email as indicating uncertainty as to which entity Soanar was dealing with. The email was sent in the context that substantial amounts were then unpaid by DCMS, and a response to it from the then Chief Financial Officer of Soanar noted that DCMS was on credit hold and that she would prefer that no orders be sent to DCMS from the delivery referred to in Ms Goman's email. In my view, the reference to "DCM?" should be read, if it were relevant, as a question whether a delivery could be made to DCMS given the amounts then unpaid by it. 24The Liquidators also rely on Soanar's failure to call Ms Goman to give evidence concerning that email, submitting that a Jones v Dunkel ((1959) 101 CLR 298) inference should be drawn that that evidence would not assist Soanar. In Fabre v Arenales (1992) 27 NSWLR 437 at 449-450, Mahoney JA (with whom Priestley and Sheller JJA concurred) observed that the significance to be attributed to the fact that a witness did not give evidence depended upon whether it was to be inferred that the reason the witness was not called was because the party expected to call him feared to do so, and that such an inference would not be available or would be of little significance if the reason why the witness was not called had no relevant relationship with the fact in issue. I do not consider that a Jones v Dunkel inference should be drawn from that matter, when evidence as to Soanar's or Ms Goman's subjective understanding of the entity it was dealing with would not have been admissible to identify the parties to the relevant contracts. Purchase orders from late July 2010 25Mr Koumoukelis gave evidence, admitted as evidence of his understanding only, that DCMG had purchased solar panels and inverters from Soanar for its business, commencing about 30 July 2010 when it issued purchase orders for 170 inverters and 1,500 complete systems. The Liquidators also rely on two purchase orders for those purchases both sent under cover of emails dated 30 July 2010 from a DCM Solar email address. It appears that the July 2010 purchase order for 170 inverters is not part of the debt claimed by Soanar against DCMS, since the relevant invoice has been paid. The Liquidators rely on the form of that purchase order which has a reference to "DCM Green" at the top right of the order; however, that order also bears the Company name "DCM Sanctuary Pty Limited", the previous name of DCMS, and the Australian company number for DCMS. The Liquidators also rely on an order placed for 1,500 complete systems also placed on 30 July 2010. The 30 July 2010 purchase order also does not form part of Soanar's claim because it was not filled. That order contains a reference to "DCM Green" in the top right hand corner and an order number with a "DCM Green" reference, but again contains the company name of "DCM Sanctuary Pty Limited", the previous name of DCMS, and the Australian company number for DCMS. 26It does not seem to me that, objectively, these documents would be read as amounting to a change of the contracting party from DCMS to DCMG, where they did not refer to the corporate entity, DCMG, and the reference to "DCM Green" could readily be understood as a trading name or business name. The tax invoice issued by Soanar in respect of the July 2010 inverter order was addressed to the DCM Sanctuary Unit Trust, consistent with a dealing with DCMG rather than DCMS. On 3 August 2010, Soanar issued a quotation in respect of the 1500 solar kits addressed to DCMS (CB3:1029), which provided for staged delivery in three tranches to be delivered from mid September 2010 to November 2010. On 4 August 2010 DCMS submitted a purchase order for the first tranche of solar kits (CB3:1031). That purchase order does not refer to DCM Green. The words "DCM Solar" appear in the top right hand corner and the company details for DCMS appear on the bottom right hand corner. 27Mr Clune's evidence was that he told representatives of DCMS that Soanar could not satisfy the 30 July 2010 purchase order for 1500 solar kits and proposed a staged delivery, as set out in the 3 August 2010 quotation (Clune affidavit [15]). His evidence is that he also advised Ms Sweetnam of DCM that any new purchase order should not refer to DCM Green because "this is the way your account is set up and it is for our insurance policy" (Clune affidavit [15(h)]). The Liquidators sought to treat this as, in effect, involving a process by which orders that were in reality for DCMG were to placed "in the name of" DCMS. Mr Clune was cross-examined as follows (15.3.13, T82-83): "Q. Soanar required that all of the stock to be supplied be ordered in the name of "DCM Solar"? A. We took orders in the name of DCM Solar, yes. Q. You stipulated that the stock had to be ordered in the name of "DCM Solar", didn't you? A. We - well, there was a instance where when we received big orders 7,000,000 I was told by our financial controller to refuse the order. Q. I am sorry, you were told by the financial controller to refuse the orders? You said to Ms Sweetnam the purchase orders are to be ordered in the name of DCM Solar? A. That was the directive from our financial controller." 28Mr Clune's evidence was that he sought to have the orders issued in the name of DCM Solar because "[t]hat was who we were dealing with" (15.3.13, T83). That seems to me to be the more likely explanation of events, and I do not draw the inference that the Liquidators seek that the reference to the "name of DCMS" was intended to conceal the fact that Soanar was dealing with DCMG, rather than to reflect the fact that Soanar was dealing with DCMS. It also seems to me to be of considerable significance that, although the Liquidators contend that the 30 July orders were the first substantial orders made by DCMG, the banking records from Soanar's bank recording inter-bank credits for payment for those orders contain a narration that the relevant payments (of $200,000 on 12 October 2012 and $345,381.51 on 19 October 2012) were made by DCMS rather than DCMG (Clune, Ex "EC1", pp 43-46). That conduct seems to me to undercut the Liquidators' reliance on those orders and the surrounding communications as the point at which the contracting party changed from DCMG to DCMS. Mr Harris rightly accepted in oral submissions that the fact that the 30 July orders were paid for by DCMS rather than DCMG "is a problem" for the Liquidators' case, although he also observed that it was only one of many factors that needed to be taken into consideration. 29The Liquidators also rely on the evidence of Mr James Stroud, who became financial controller of DCMG from late December 2010, after Mr Moldrich ceased employment, who gave evidence explaining the order process by which, he contended, DCMG ordered stock from Soanar. The references to "DCMG" in that evidence were admitted as evidence of his understanding only. The explanation of that order process does not assist in establishing that the relevant contracts were, objectively, between Soanar and DCMG, because that evidence would be equally accurate in explaining an order process by which DCMS ordered the relevant stock in order to onsell it to DCMG. 30Mr Moldrich also gave evidence as to conversations with representatives of Soanar in respect of the reduction of the debt owing by DCMS through August, September and October 2012. The Liquidators rely on the fact that Ms George, who is no longer employed by Soanar, was not called by Soanar to refute that evidence. I have referred to the principles applicable to drawing such an inference above. I do not consider that a Jones v Dunkel inference should be drawn from Ms George's absence, both because she is no longer employed by Soanar and because it was not necessary for Soanar to contest the evidence of conversations as to the reduction of DCMS's earlier debt in order to maintain that it was dealing with DCMS rather than DCMG. 31The Liquidators also rely on several individual purchase orders and other documents (Ex D4) which contain references to DCM Green sent to and originating from Soanar in mid-January 2011 and to similar references in two quotations issued by Soanar both dated 3 February 2011 (CB1:426). There is also one occasion in which a payment appears to have been made to Soanar from DCMG, although there is no evidence as to whether Soanar was advised that DCMG was the source of the payment. It seems to me that these discrete transactions, none of which are the subject of the Proof of Debt and none of which are of substantial size, can indicate no more than that, in this time period, Soanar was (whether advertently or not) prepared to accept smaller individual orders from DCMG, and do not support a recharacterisation of earlier and larger transactions which on their face were undertaken with DCMS as being undertaken with DCMG. A further purchase order, sent on 21 January 2011, led to an order acknowledgement by Soanar to the DCM Sanctuary Unit Trust (reflecting the former corporate name of DCMS) with a shipping address recorded for DCMS and is inconsistent with any systematic change of contracting entity even at this later time. 32Mr Harris also relied, in oral submissions, on the fact that Soanar had not called other employees within its employ to give evidence, including, for example, as to the later documents within Ex D4 referring to DCM Green, and submitting that a Jones v Dunkel inference should be drawn that that evidence would not assist Soanar. I do not consider that a Jones v Dunkel inference should be drawn from the absence of evidence of Soanar employees as to why later documents referred to DCM Green. The subjective understanding of those employees of the documents is not relevant and there is no particular reason to speculate that they had other relevant oral communications with DCMS or DCMG employees, as to which the Liquidators have also not led evidence, as to those documents. Credit insurance 33Soanar took out credit insurance in respect of debts incurred by DCMS; the policy limit and the term of the policy changed from time to time, but the policy limit after 29 September 2012 was $3,000,000 (Ex D2). DCMS (and DCMG) knew of the existence of that credit insurance through Mr Moldrich, their chief financial officer (15.3.13, T129-130). Indeed, Mr Moldrich sent financial information for DCMS to Soanar's insurance brokers on 20 April 2010 (Ex D2) and 28 September 2010 (Ex P8). Mr Moldrich accepted that he knew that the insurer wished to see a balance sheet for the purposes of assuring itself of the creditworthiness of Soanar's debtor, and this course is only consistent with DCMS rather than DCMG being that debtor (15.3.13, T130). 34The Liquidators, perhaps surprisingly, placed considerable weight on what might have been thought to be an area of weakness in their case, by relying on the proposition that Soanar has credit insurance in respect of any debt which DCMS was unable to pay, and also potentially had the benefit of a guarantee by DCMS's director(s) for any such debt under the March 2010 Terms, but did not have credit insurance or guarantees in respect of any debt which DCMG is unable to pay to it. The Liquidators contend that "[t]his provides a motivation for Soanar asserting that the debt is owed by" DCMS. Mr Harris formulated the Liquidator's position as follows in oral submissions: "The [Liquidators] say what is clear here is that in July 2010 DCM Green started to issue purchase orders for stock from Soanar and that Soanar requested that DCM Green's orders be issued in the name of DCM Solar, so that they could seek to have those orders brought within the umbrella of their insurance policy." (19.3.2013 T140) This submission seems to me to have the difficulty that the same factors would be understood by the objective observer to make it likely that Soanar was in fact contracting with DCMS, so as to obtain the benefit of the credit insurance and guarantee, rather than contracting with DCMG in a manner which would deprive it of that credit insurance and guarantee but pretending not to do so. 35The Liquidators rely on the fact that, it appears, the credit insurance obtained by Soanar expired on 31 August 2010, before being renewed after further information concerning DCMS's financial position was provided to the insurance brokers. The Liquidators contend the proximity in timing between the temporary expiry of the credit insurance and the conclusion of the SHCP supports an inference that Soanar was dealing with DCMG from that point. I would not draw that inference. First, the documents on which the Liquidators rely indicate that the expiry of the credit insurance on 31 August 2010 reflected the need for further financial information concerning DCMS to renew cover beyond that date. A Credit Limit Decision dated 29 April 2010 conveyed by Soanar's insurance broker to Soanar stated that the cover would expire on 31 August 2010 and that "[t]o extend cover beyond the expiry date, your insurer will require the debtor's June 2010 financial statements" (Ex D2). Second, that inference is inconsistent with the fact that Soanar thereafter renewed its credit insurance to cover dealings with DCMS, not DCMG, after financial information was provided by DCMS (Ex D2). The extension of cover in respect of DCMS, obtained with DCMS's assistance in providing information, supports a finding that the parties' objective intention was that the relevant dealings were between Soanar and DCMS. 36The Liquidators also rely on the fact that Ms George was not called by Soanar to give evidence as to dealings between Soanar and its credit insurer, and contend that a Jones v Dunkel inference should also be drawn in respect of this matter. I have referred to the principles applicable to drawing such an inference above. I also do not consider that any Jones v Dunkel inference should be drawn from Ms George's absence, so far as an issue in respect of credit insurance arises in the proceedings, where that issue could properly be addressed by the tender of the relevant documents. Dealings between Soanar and de Vries Tayeh 37The Liquidators also relied on the fact that Soanar did not produce, in response to a notice to produce, correspondence with de Vries Tayeh who were retained by Soanar in late 2010 to assess the likelihood of the debt owed by DCMS (or, on the Liquidators' case, DCMG) being repaid and also in respect of a possible equity investment in the DCM business. Mr Harris contended that it would be relevant to know what Mr Nuttall, the former Chief Financial Officer of Soanar who was involved in instructing de Vries Tayeh, told them about Soanar's contractual arrangements and whether he had said that DCMS or DCMG owed Soanar a substantial amount. It is by no means clear that Mr Nuttall's communications with de Vries Tayeh as to his subjective understanding of this matter would be relevant to the identification of the parties to the relevant contracts. It appears that there may have been an inadequacy in the searches undertaken to identify such documents, where Mr Nuttall was no longer employed at the time the notice to produce was received and was not involved in the relevant searches, although it was not affirmatively established that Soanar in fact held relevant documents to produce. In any event, this could go no further than supporting an inference that the relevant documents would not assist Soanar. Soanar's lodgement of a proof in the liquidation of DCMG 38The Liquidators also rely on the fact that Soanar sought to prove in the liquidation of DCMG for the amount of $3,849,408.61, which substantially corresponds to the amount claimed in this proceeding, and Mr Nuttall was cross-examined at some length as to that matter. 39The information available to Soanar at this time in respect of the dealings by DCMG and DCMS was plainly somewhat confusing. The liquidators of DCMG had pointed out in a notice to creditors dated 11 March 2011 that "Soanar will likely be a creditor of either DCMG or [DCMS]. It is unlikely to be a creditor of both companies". One of the directors of DCMS, Mr Marjoribanks, had advised Soanar's chief executive officer, Ms Martin, on 15 March 2011 that he was shocked by the information that DCMS owed a substantial debt to Soanar and that had he understood that DCMG rather than DCMS had been purchasing from Soanar. On 15 March 2011, Soanar wrote to Mr Baynes, a director of DCMG and DCMS, indicating concern "that you have taken it upon yourselves to transfer stock sold by us [Soanar] to DCM Solar to DCM Green". It does not appear that DCMG or DCMS then responded to contest that proposition. Mr Nuttall's evidence was that he instructed that the proof be submitted to protect Soanar's position in the light of this uncertainty and issues arising in respect of stock subject to the retention of title provisions (Nuttall [12(e)], 15.3.13, T89-92). Mr Nuttall's evidence in cross-examination seems to me to be entirely consistent with the objective probabilities. It was hardly surprising that Soanar would seek to keep open claims against both DCMS and DCMG until there was a binding determination that one or other was properly founded. 40I do not consider that the lodgement of a proof of debt by Soanar in the liquidation of DCMG was an admission by Soanar that it was a creditor of DCMG rather than DCMS. The approach adopted by Soanar in lodging proofs of debt in the liquidations of each of DCMS and DCMG, in circumstances that there was a lack of clarity as to whether the Liquidators of DCMS (or DCMG) would accept that the relevant debt was owed by DCMS (or DCMG) bears some similarity to the course which would have been open to Soanar, had DCMS and DCMG not been in liquidation and proceedings against them not been stayed, to bring proceedings against both DCMS and DCMG and advance a primary position that DCMS was liable and, against the contingency that DCMS established the contrary, an alternative position that DCMG was liable. Information provided by directors to DCMG's liquidator 41There is also evidence of information provided by the two common directors of DCMS and DCMG to DCMG's liquidator that is consistent with Soanar's case that stock was sold in the first instance to DCMS, albeit later transferred by DCMS to DCMG. On 18 December 2011, Soanar took an assignment of certain rights of DCMG under rental agreements between DCMG and third parties. The recitals to that agreement ("DCMG Assignment") relevantly recorded that: "B. [Soanar] supplied a number of solar Photovoltaic Rooftop Systems and solar heating panels (Systems) to a related company of DCM[G], DCMS, prior to 10 April 2011. C. The directors of DCM[G] have advised the Liquidators [of DCMG] that the Systems supplied to DCMS were on-sold by DCMS to DCM[G] prior to 10 March 2011 and the directors of DCM[G] have advised the Liquidators of DCM[G] that the accounts of DCM[G] reflect this position." Conclusions as to identification of parties to contract 42Applying the principles set out in paragraphs 6-11 above to the facts that I have found above, it seems to me that the dealings between the parties and the objective circumstances indicate that the contracts in issue were between Soanar and DCMS, rather than between Soanar and DCMG. The March 2010 Terms were with DCMS, not DCMG, and an objective observer would not conclude, from the parties' dealings, that Soanar had agreed to abandon those terms and instead proceed under an arrangement with DCMG without any attempt to amend the March 2010 Terms to document the new arrangement. It is also objectively unlikely that Soanar would have agreed to trade with DCMG rather than DCMS, where that would defeat the operation of the director(s)' guarantee contained in the March 2010 Terms and deprive it of credit insurance which it had taken out and renewed in late 2010 in respect of dealings with DCMS. The fact that Mr Moldrich sent financial information for DCMS, not DCMG, to the insurance brokers arranging Soanar's credit insurance for DCMG is consistent with DCMS being both the contracting party and the party liable for payment. 43The purchase orders typically refer to DCMS and, on those occasions where there is a reference to "DCM Green", refer to the company name and Australian company number of DCMS. The Liquidators' contention that the orders placed in July 2010 marked the start of a new pattern of dealings with DCMG, not DCMS, is inconsistent with the fact that DCMS paid for the relevant stock. The requirement by Soanar's financial controller, relayed by Mr Clune to DCMS, that purchase orders not refer to "DCM Green" is more likely to reflect the reality of the dealing rather than to seek to conceal that reality. In the light of these factors and the evidence to which I have referred above, it also does not seem to me that a reasonable observer would have understood that the dealings between the parties that references to DCMS were generally to be understood as masking the true contracting party, DCMG, rather than being intended to be taken at "face value": Seiwa Australia Pty Ltd v Beard above at [185]. Agency 44The Liquidators advanced an additional argument in closing submissions, contending that DCMS had contracted as agent for DCMG in circumstances where Soanar knew that DCMS was contracting with it in that capacity, and knew the identity of its principal, and that DCMS had no liability to Soanar, which was only entitled to recover its debt from DCMG. Mr Harris contended in oral submissions that the March 2010 terms were, in effect, amended in July 2010 so that orders for stock would be made by DCMG through its agent DCMS where "the principal [was] clearly identified and was expected to be the party who would pay". The Liquidators rely on the conversation to the effect that orders should be placed "in the name of" to which I have referred in paragraph 27 above. 45In Montgomerie v United Kingdom Mutual Steamship Association Ltd [1891] 1 QB 370 at 371, Wright J summarised the general rule: "... that where a person contracts as agent for a principal, the contract is the contract of the principal, and not that of the agent; and, prima facie, at common law the only person who may sue is the principal, and the only person who can be sued is the principal." His Honour also noted that there were exceptions to the general rule and (at 372) that: "In all cases the parties can by their express contract provide that the agent shall be the person liable either concurrently with or to the exclusion of the principal, or that the agent shall be the party to sue either concurrently with or to the exclusion of the principal." 46In Teheran-Europe Co Ltd v S T Belton (Tractors) Ltd [1968] 1 All ER 585; [1968] 2 QB 53 at 59-60, affirmed by the Court of Appeal in Teheran-Europe Co Ltd v S T Belton (Tractors) Ltd [1968] 2 QB 545, Donaldson J noted that an agent can conclude a contract on behalf of its principal by (1) creating privity of contract between the third party and his principal, without himself becoming party to the contract; (2) creating privity of contract between the third party and his principal, while also himself becoming a party to the contract; or (3) creating privity of contract between himself and the third party, but no such privity between the third party and his principal. That statement was in turn approved by the Full Court of the Federal Court of Australia (Beaumont, Gummow and Einfeld JJ) in Australian Trade Commission v Goodman Fielder Industries Ltd (1992) 36 FCR 517 at 521-522, where their Honours also referred to a statement in Chitty on Contracts (1983), [2274] that: "The fact that a person is an agent and is known to be so does not, however, of itself necessarily prevent him incurring personal liability ... Whether this is so is to be determined by the construction of the contract, if written, and by its nature and the surrounding circumstances." 47The reasoning in Australian Trade Commission v Goodman Fielder Industries above was in turn approved by Sheller JA (with whom Meagher and Powell JJA agreed) in Australian Tallow and Agri-Commodities Pty Ltd v Malaysia International Shipping Corporation [2001] NSWCA 16; (2001) 50 NSWLR 576 at 583. In Highfield Investments Pty Ltd v Commercial & Residential Developments (SA) Pty Ltd (No 2) [2012] SASC 191 at [9], Blue J referred to the case law and summarised the effect of these principles as that "Where a person is an agent for a principal and the fact of the agency is disclosed to the other party to the contract (whether or not the name of the principal is disclosed), depending on the proper construction of the contract, there may be a contract: (a) between the other party and the principal; (b) between the other party and the agent; or (c) between the other party and both the principal and agent." 48The factors to which I have referred above as leading to the conclusion that an objective bystander would not have understood the parties to the relevant dealings, from mid-2010 on, to be Soanar and DCMG rather than Soanar and DCMS, also seem to me to indicate that DCMS and Soanar were dealing as principals, rather than that Soanar was dealing with DCMS as a disclosed agent for DCMG. There is no express reference, in the account of the conversations in mid-2010 on which the Liquidators rely, to DCMS acting as agent for DCMG and there is no express reference to such an agency in the purchase documentation. Soanar's requirement that orders be placed in DCMS's name does not support that conclusion if read (as I read it for the reasons noted above) as requiring that those orders be lodged by DCMS as the party with whom Soanar has entered the March 2010 Terms and for which it had obtained credit insurance. Even if, contrary to this conclusion, DCMS was acting as agent for DCMG, I can see no basis for a conclusion that it did so in a way which would exclude its role as party to the contract or its liability to the contract. All the reasons which indicate that an objective bystander would not consider that DCMG was party to the contract in place of DCMS would also indicate that it was highly unlikely that Soanar would have accepted an arrangement by which it was placed in substantively the same position as if DCMG rather than DCMS was party to the contract, likely depriving it of the benefit of the March 2010 Terms, the retention of title provision and director(s)' guarantee contained in those terms and the credit insurance which it had taken out. Adjustment for recovered stock and effect of Deed of Assignment 49Soanar accepts that it has recovered possession of stock which was allowed against the amount of the Proof of Debt and the Liquidator has not contested the value attributed by Sonar to that stock. Soanar also acknowledged in submissions that the amount of the Proof of Debt will require some further adjustment to take account of sales of recovered stock since the Proof of Debt was submitted. Soanar led evidence to updates the debt summary submitted with its Proof of Debt, by reference to subsequent sales of recovered stock. The Liquidators ultimately did not contest that evidence, or the steps that had been taken by Soanar to realise that stock. I do not understand the Liquidators to have suggested, and there is no evidentiary basis for a suggestion that, Soanar had not acted reasonably in the situation in which it found itself. I accept Soanar's submission that the proper deduction for the value of stock recovered after the proof of debt was lodged, is $173,521.86 (excluding GST), made up of $162,637.86 realised from sales of recovered stock (Martin affidavit, 8.3.2013 [2]) and the estimated value of remaining recovered stock of $10,884.00 (Martin affidavit, 7.3.2013 [4]). 50The relevance of the assignment of rental agreements under the DCMG Deed was also in issue in the proceedings. The operative terms of the DCMG Deed provided for DCMG to sell and assign and Soanar to purchase all of DCMG's interest in the Assets (as defined) for a specified price on and subject to the terms of the DCMG Deed. The Assets meant all of DCMG's right, title and interest (if any) in the Soanar Systems, if any (as defined); certain rental agreements and future renewable energy certificates as provided by clause 4.2 of the DCMG Deed. Under clause 5 of the DCMG Deed, Soanar also agreed to assume "all rights and obligations ... under the Rental Agreements including but not limited to any warranty or maintenance obligations" and Soanar indemnified DCMG in respect of any liability that may arise under the rental agreements. 51The Liquidators contend that the DCMG Deed gave Soanar the benefits of rental agreements and outstanding renewable energy certificates in respect of the systems subject to that assignment and that the value of those certificates "must be credited against the debt which is owed to Soanar". On the other hand, Soanar contends that it acquired the right to receive income under the rental agreements by purchase from the Liquidators of DCMG on payment of consideration of $25,000 and that it will incur costs in performing obligations to install and repair solar panel systems in return for rental payments from occupants of the relevant premises, and it is not required to give credit for any (net) benefit obtained by Soanar under the assigned rental agreements. 52The Liquidators' submissions did not clearly identify the legal basis of the contention that any benefits to Sonar under the DCMG Deed should be treated as an offset to the amount claimed by Soanar. It appears that contention is based on the proposition that, where an innocent party has entered into a transaction arising out of a breach of contract that reduces its loss, that reduction is to be taken into account even if the innocent party was not under a duty to mitigate that loss by entry into that transaction. The case usually cited for that principle is British Westinghouse Electric & Manufacturing Co Ltd v Underground Electric Railways Company of London Ltd [1912] AC 673, where Viscount Haldane LC observed (at 689) that, in a claim for contractual damages, when the claimant: "... in the course of his business ... has taken action arising out of the transaction, which action has diminished his loss, the effect in actual diminution of the loss he has suffered may be taken into account even though there was no duty on him to act." His Lordship also observed (at 690): "[P]rovided the course taken to protect himself by the plaintiff in such an action was one which a reasonable and prudent person might in the ordinary conduct of business properly have taken, and in fact did take whether bound to or not, a jury ... may property look at the whole of the facts and ascertain the result in estimating the quantum of damage." His Lordship then emphasised (at 690) that "[t]he subsequent transaction, if to be taken into account, must be one arising out of the consequences of the breach and in the ordinary course of business." 53That principle has been applied in, for example, Re Monroe Schneider Associates (Inc) and Anor No 1 Raberem Pty Ltd (1991) 33 FCR 1 at 27 and in Ruthol Pty Ltd v Tricon (Australia) Pty Ltd [2005] NSWCA 443; (2005) 12 BPR 23,293 at [40], where Giles JA (with whom Santow JA and Hunt AJA agreed) observed that: "If the innocent party does take action to mitigate the loss to it consequent on the guilty party's wrong, even if the action goes beyond reasonable action, in general the guilty party is entitled to an allowance for the benefit to the innocent party from that action (the avoided loss principle)." The principle was also recently considered and applied by the Court of Appeal in Macourt v Clark [2012] NSWCA 307, in holding that action taken by the claimant had in that case avoided the relevant loss. 54However, the principle has limitations that are of potential significance in this case. In Ruthol, Giles JA approved (at [47]) an observation of Professor Burrows in Remedies for Torts and Breach of Contract, 3rd ed, p 158 that, where a compensating advantage has have been obtained by a claimant's action subsequent to a breach of contract: "the test for directness appears to turn on whether the compensating advantage derived from actions taken by the claimant to avoid the consequences of the wrong." 55The principle applies where the relevant transaction is not an "independent or disconnected transaction" and "arise[s] out of the consequences of the breach" and it is not sufficient that a subsequent transaction takes place "in the context of an existing wrong" or that the wrong provides "the occasion for" that transaction: Monroe Schneider at 27-28; Ruthol at [41], [50]. Soanar contends that a subsequent transaction will not be treated as reducing a party's loss where it involves separate obligations unrelated to the cause of action or involves a separate commercial decision or risk (Monroe Schneider at 28-29) or where the benefit did not derive from an action taken by the innocent party "to avoid the consequences of the wrong" (Ruthol at [46]-[48]) and the fact that the extent to which the subsequent transaction has diminished the plaintiff's loss is one that cannot be known without a complex factual investigation may also provide a policy reason for not treating it as a compensating benefit (Ruthol at [67]-[68]). 56In the present case, the fact that DCMG was in possession of solar kits so as to install them and enter rental agreements was a necessary prerequisite to the entry into the DCMG Deed, and it appears that DCMS's failure to pay the purchase moneys for solar kits, and the transfer of those kits into DCMG's possession, may well have provided the occasion for Soanar to purchase the rights under the rental agreements. On the other hand, as Soanar points out, the DCMG Deed was executed several months after transactions between DCMS and Soanar ceased and required Soanar both to pay the specified consideration of $25,000 to acquire the rights under the rental agreements and to incur ongoing costs and provide an indemnity to DCMG in respect of the transaction, which may or may not be ultimately profitable for Soanar. It would, it seems to me, be a close question whether the taking of that assignment could be properly characterised as a step directed to avoid the result of DCMS's non-payment of the amounts due to Soanar, as distinct from an independent transaction involving separate rights and obligations to the claim against DCMS. 57It is ultimately not necessary to decide that question, since this issue can be determined on another basis. The authorities establish that such a benefit will only be treated as offsetting the claimant's loss if the claimant obtains it from a transaction in the ordinary course of the claimants' business: British Westinghouse Electric & Manufacturing Co Ltd v Underground Electric Railways Company of London Ltd at 690; Ruthol at [41]. The entry into the DCMG Deed was not a transaction in the ordinary course of Soanar's business, which (as Soanar points out) is the sale of electronic goods rather than the acquisition of interests in rental agreements, and any benefit from that transaction is not properly treated as an offsetting benefit to Soanar's claim for that reason: Orders 58The parties should bring in short minutes of orders to give effect to this judgment. I will hear the parties as to costs. ********** 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: 24 April 2013