Supreme Court New South Wales Medium Neutral Citation: ACN 151 368 124 v Pro-Pac Packaging (Aust) Pty Limited [2017] NSWSC 913 Hearing dates: 26/06/2016, 27/06/2017 and 28/06/2017 Date of orders: 30 June 2017 Decision date: 30 June 2017 Jurisdiction: Common Law Before: McDougall J Decision: Separate questions answered as set out at [102]. Catchwords: CONTRACT – whether side letter had contractual effect – where no consideration – CONTRACT – whether representation had contractual effect – CONSUMER LAW – whether representation misleading and deceptive – where representation was not relied on – CONTRACT – whether estoppel defence available Legislation Cited: Competition and Consumer Act 2010 (Cth) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Australian Co-operative Foods Ltd v Norco Co-operative (1990) 46 NSWLR 267 Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 Golden Horizon Finance Co Ltd v Financial & Energy Exchange Limited [2016] NSWSC 593 Hoyt's Ltd v Spencer (1919) 27 CLR 133 Johnson Matthey Ltd v AC Rochester Overseas (1990) 23 NSWLR 190 Taylor v The Owners – Strata Plan No 11564 (2014) 253 CLR 531 Watson v Foxman (1995) 49 NSWLR 315 Whittet v State Bank of New South Wales (1991) 24 NSWLR 146 Category: Principal judgment Parties: ACN 151 368 124 formerly Eco Food Pack Australia Pty Ltd (Plaintiff) Pro-Pac Packaging (AUST) Pty Limited (Defendant) Representation: Counsel: M R Pesman SC/ A D Crossland (Plaintiff) S Duggan (Defendant) Solicitors: Watson Law Pty Ltd (Plaintiff) Harpur Phillips (Defendant) File Number(s): 2014/132717 Judgment 1. HIS HONOUR: By written agreement now agreed to have been made on 19 June 2013 (the sale agreement), the plaintiff (EFP) agreed to sell its business to the defendant (Pro-Pac). At the same time, three other written agreements were made: a "Supply Agreement"; a "Commission Agreement"; and an "Employment Agreement". In addition (it is now agreed) there was signed a "Side Letter" that purported to affect some of the terms of the sale agreement. 2. In very broad terms, the total consideration payable by Pro-Pac was $6 million together with stock at valuation. The consideration was payable by way of a "Completion Payment" of $1.2 million subject to adjustment, a "Deferred Payment" of $250,000 payable in four half-yearly instalments, and incentive payments to be made if earnings and gross profit targets were met in the following years. In addition, there was to be an inventory of good and saleable stock, and Pro-Pac was to pay the value of that stock. 3. EFP sues to recover the unpaid balance of the deferred payment and what it says is the "Inventory Amount" – the value of the stock that was transferred to Pro-Pac. Pro-Pac denies that it is liable for the deferred payment, accepts that it is liable to pay something on account of the inventory amount, but says that it is entitled to set off, against anything otherwise payable, damages for breach of warranty, breach of an alleged collateral contract, or for alleged misleading or deceptive conduct. The issues for decision 1. By agreement made between the parties at the commencement of the hearing, and reflected in the court's orders made on 26 June 2017, all questions relating to the inventory amount, all questions as to the taking of accounts to reflect the fact that, for a period, the business was carried on by EFP for the benefit of Pro-Pac, and some other "rats and mice" issues are to be resolved, at some time in the future, by expert determination in accordance with the relevant clause of the sale agreement. 2. In the light of that agreement, the issues for present decision (slightly reworded) are the following: 1. Did the parties reach an agreement with terms contained in the document entitled 'Side Letter – Refund of Deferred Payment"? 2. If so, what is the effect of that agreement in relation to the Deferred Payment? 3 Is Pro-Pac liable to pay EFP for all or part of the Deferred Payment? 4. Did Mr Beecham represent to Pro-Pac prior to execution of the BSPA that the 'Baiada Rebate' was 30 percent of the invoiced amount applied to all monthly Baiada Poultry Purchases (the Baiada Representation)? 5. Was the Baiada Representation made in breach of the warranty in Schedule 1, Clause 3.1(1) of the BSPA (the Truth and Accuracy Warranty) OR in contravention of s 18 of the Australian Consumer Law OR in breach of a common law duty to Pro-Pac? 6. If so, what loss, if any, has resulted to Pro-Pac from such breach or contravention? 7. What liability does each of the cross-defendants have for that loss? 8. Did Mr Beecham represent that the following prices were a true and correct listing of the price arrangement EFP had with Inghams Chickens? ITEM DESCRIPTION WARRANTED SALE PRICE PER PIECE TE 8x5x35 with pad (clear) AUD 0.12963 TE 8x7x35 with pad (clear) AUD 0.17629 TE 11x6x20 with pad (clear) AUD 0.20417 TE 11x9x35 with pad (clear) AUD 0.31000 TE 130635 with pad (clear) AUD 0.25909 TE 8x5x35 with pad (green) AUD 0.12963 9. Were the Inghams Representations made in breach of the Truth and Accuracy Warranty OR in contravention of s 18 of the Australian Consumer Law OR in breach of a common law duty to Pro-Pac? 10. If so, what loss has resulted to Pro-Pac from such breach or contravention? 11. What liability does each of the cross-defendants have for those losses? 12. Was it an express term of the employment agreement that Pro-Pac would lend Mr Beecham $200,000? 13. If so, does Mr Beecham owe Pro-Pac $200,000 plus interest? 14. Is Pro-Pac estopped from claiming the sum of $200,000 plus interest? 15. Did Mr Beecham fraudulently misappropriate $270,435.92 from Pro-Pac? 16. Did Mr Beecham breach the employment agreement? 1. To give some content to those issues, it is necessary to understand that: 1. EFP's business involved the acquisition of trays from a supplier in China (which was a company related to EFP) and the sale of those trays to the producers of raw poultry meat and other raw meats in Australia. At a level of some generality, the trays (which were of different kinds) were made of a polystyrene or polyethylene product, and were used for the distribution and sale of raw meats. 2. At the time of the sale, EFP did not have a large customer base: it appears to have sold its products only to about eight or nine entities throughout Australia. 3. Mr Beecham was a director of EFP and of at least some of its associated companies, and was in effect the managing director of EFP's business. 4. "Baiada Poultry" is a very large group of companies that produce and distribute poultry products throughout Australia. 5. Baiada was, at the time of the sale, by far the single biggest customer of EFP. 6. "Inghams" is another large producer of poultry meat within Australia. 7. At the time of the sale, Inghams was not a substantial customer of EFP, but EFP had high hopes of its becoming so. The witnesses 1. Mr Beecham was the only witness of fact called by EFP. 2. Pro-Pac called: 1. Mr Penn, who was the chief executive officer of Pro-Pac and of its parent (a listed public company) at the relevant time; 2. his wife Mrs Penn; 3. Mr Saus, who was and is the chief financial officer of Pro-Pac and its listed parent; and 4. Ms Grandy, an employee of Pro-Pac at the time. 1. All those witnesses swore affidavits. All save for Ms Grandy were cross-examined. Ms Grandy was not cross-examined, because she has child care commitments and Mr Pesman of Senior Counsel, who appeared with Mr Crossland of Counsel for EFP, took the view that he would not disturb her for the purpose of putting the few questions that he wished to ask. Mr Duggan of Counsel, who appeared for Pro-Pac, said that he would take no point by reason of the failure to put any relevant material to her. 2. I reminded Counsel that, regardless of their agreement and the very good reasons for making it, the consequence was, nonetheless, that I should treat Ms Grandy's evidence as unchallenged, and therefore, subject to the usual limiting rules, as proving what it said. As matters have turned out, Ms Grandy's evidence is of little significance for the issues that I have to decide. 3. The other witnesses were cross-examined. I formed the view that each of them was unreliable. 4. Mr Beecham was questioned about his financial position in May and June 2013 (leading up to the date when the sale agreement was made). He denied that he was under financial stress. It was put to him that one of the reasons he made misrepresentations to Messrs Penn and Saus was his desire to obtain the benefit of an employer loan, for which the sale agreement provided, to alleviate that financial stress. Mr Beecham denied this, and said that he was capable of meeting all his obligations as they fell due from his own salary. 5. That aspect of Mr Beecham's evidence was plainly untrue. His contemporaneous emails (there is no need to recite their sordid details) made it clear that he was suffering very severe financial stress at the time, and that he was desperate to get his hands on the loan. 6. Mr Penn was cross-examined at some length about his state of mind at the time, including his understanding of Mr Beecham's financial position and accounting literacy, and the reasons why it was desirable for Pro-Pac to consummate the purchase as quickly as possible. Those propositions were put to him precisely. With one minor exception, he denied them. He was then taken to a board paper that he had prepared, dated 12 June 2013, in which he recommended to the parent board that it approve the purchase. Each and every one of the denied statements appeared in that board paper. 7. Mr Saus based his evidence, in particular of disputed meetings, very closely on detailed file notes that he made at the time. He refreshed his recollection from those file notes, and they were put into evidence. There were other contemporaneous documents that he had created, and they were put into evidence. To the very substantial extent that his testimonial evidence is supported by those documents, I accept it. 8. However, as to one matter to which Mr Saus swore – the making of the so-called "Inghams representation" (namely, that the prices shown in a certain document were "prices agreed and locked in with Inghams") – Mr Saus' otherwise detailed file note of the meeting contains no hint of any reference to Inghams, let alone a note that could be seen to support his sworn account of the terms of the representation. It is very difficult indeed to accept that a man as precise and meticulous as Mr Saus appears to have been would not have recorded the substance of that representation, or at least some reference to it, if it were made. I do not accept that he would have overlooked it. 9. Added to this, there is the remarkable fact that Mr Saus' account of the relevant representation corresponds precisely with that given by Mr Penn, with the exception that Mr Penn says that after the representation was made, he asked Mr Beecham "can you please send me a copy of that after this meeting?" Mr Saus says that the question was "can you please send us a copy of those prices for Ingham's?" 10. Whether this stunning resemblance reflects a mere coincidence, that two men, seeking to recollect the words used as best they could two years or more after the event, settled on precisely the same formulation, or whether it reflects some over-enthusiastic use of the word processor, is open to question. I recognise of course that there are other possibilities, including that the two witnesses put their heads together, or that one read a draft of the other's affidavit (both of which were denied). Whilst I accept that there is yet another possibility – namely, that they are telling the truth – that runs head-on into Mr Saus' inexplicable (on the assumption that they are telling the truth) failure to record the words or their substance in his file note. 11. In addition, it must be accepted that both Mr Beecham and Mr Penn have a significant financial stake in the outcome of the proceedings. In Mr Beecham's case, this stake derives at least in part from his liability (on Pro-Pac's cross-claim) to repay the loan of $200,000 that was made to him, together with interest at 6.45% pa calculated on monthly rests. In Mr Penn's case, the stake arises from his 10% shareholding in the parent company. 12. As to Mrs Penn, all I need say is that her evidence in cross-examination, in particular as to whether certain prices that a Mr Rymer of Inghams said were all his company would pay for trays, were or were not sustainable, is so confused as to suggest, at the very least, a significant degree of unreliability. 13. There were other matters that I have taken into account in my assessment of the credibility of, in particular, Mr Beecham and Mr Penn. It is not necessary to give further details. 14. In the result, I am prepared to accept the evidence of Mr Saus to the extent that it is supported by or consistent with his contemporaneous documents. I am not prepared to accept the uncorroborated evidence of Messrs Beecham and Penn. I think the safest guide to the truth is to consider the contemporaneous documents, and to assess the testimonial evidence by reference to them and by reference to what clearly emerge as the probabilities, viewed objectively, of certain things' having been said or done. 15. No doubt recognising that such an approach was likely, Mr Pesman indicated in final submissions that he did not propose to contest a number of the evidentiary issues. Issues 1, 2 and 3: the deferred payment Relevant terms of the sale agreement and the side letter 1. Clause 3 of the sale agreement dealt with payment of the purchase price. I set it out: 3 Purchase Price 3.1 Purchase Price The parties acknowledge and agree that the purchase for the Assets and Business is: (a) the Completion Payment; (b) Deferred Payment; and (c) the Inventory Amount. 3.2 Completion Payment (a) The Completion Payment is $1,500,000.00, less: (i) an amount equal to 70% of the monetary value of Accrued Employee Entitlements, as at the Completion Date; (ii) the Agent Fee; and (iii) the Initial Agency Period Profit Amount (b) The Buyer, at the direction of the Seller must on Completion pay the Completion Payment to the Seller in immediately Available Funds. 3.3 Deferred Payment The Buyer agrees to pay the Seller the Deferred Payment of $250,000.00 in four half-yearly instalments of $62,500.00 each, the first of which is to be paid by the Buyer 6 months after the Completion Date and the last instalment is to be paid on the second anniversary of the Completion Date. 3.4 Inventory Amount The Buyer agrees to pay the Inventory Amount to the Seller in the manner set out in clause 6. 1. At the time the sale agreement was made, EFP carried on its business from premises at Moorebank, over which it held a three year registered lease. Clause 10 of the sale agreement sought to ensure that Pro-Pac could use those premises for the purposes of conducting the business which, by and on completion of the sale agreement, it acquired. Clause 10 provided, so far as it is relevant: 10.1 Licence The Seller and the Seller's Guarantors irrevocably grant to the Buyer a temporary licence to occupy the Premises, so that the Buyer may conduct the Business at the Premises and utilise the current facilities at the Premises for a period until 31 July 2015, or such period as agreed between the Buyer and the Seller (Occupation Licence). 10.2 Consideration (a) The Buyer, the Seller and the Seller's Guarantors acknowledge and agree that as consideration for the Occupation Licence the Buyer is to pay the Seller $10,416.37 (excluding GST) per month during the period of the Occupation Licence. (b) For the avoidance of doubt, the amount in clause 10.2(a) is inclusive of any outgoings and make good costs and as such the Buyer is not liable for any additional costs in respect of the Occupation Licence and Premises. 1. The sale contract agreement included an "entire agreement clause, cl 18(o). It provided: 18(o) This agreement embodies the entire agreement between the parties in respect of its subject matter. This agreement supersedes all previous agreements, arrangements and understandings in respect of the same subject matter. 1. The side letter sought to make further provision in relation to the lease. So far as it is relevant, it stated: (a) in consideration of the Seller granting the Buyer a licence to occupy Premises for a period until 31 July 2015 under the BPSA, the Buyer will pay the Seller the Deferred Payment (which comprises of four half-yearly instalments of $62,500.00 each, the first of which is to be paid by the Buyer 5 days post Completion Date and the last instalment is to be paid on the second anniversary of the Completion Date); and (b) if and to the extent that the Premises is sublet, assignment or otherwise disposed of by the Seller prior to 31 July 2015, which the Seller will undertake to do at the direction of and in cooperation with the Buyer, the Seller: i. will refund any instalments of the Deferred Payment already paid by the Buyer to the Seller on a pro rata basis; and ii. waives any future instalments of the Deferred Payment to be paid by the Buyer to the Seller. 1. It may be convenient to mention at this point that Mr Saus gave some rather confused evidence to the effect that the function of the deferred payment was to compensate EFP for its ongoing liability to pay rental under the lease, in circumstances where (once its assets had been physically transferred to Pro- Pac and its business had been subsumed into that of Pro-Pac) it would have no further use for those premises. He said that this somewhat unusual arrangement was cast in the form of a deferred payment obligation rather than an indemnity obligation because it meant that Pro-Pac could account on a capital rather than an income basis for the expense. I am not prepared to accept that evidence. In any event, I should make it quite clear that it could have no bearing on the proper construction and effect of the side letter read in conjunction with clauses 3 and 10 of the sale agreement. The parties' submissions 1. Mr Pesman submitted that the side letter had no contractual effect. To the extent that it was relied upon as a collateral contract, he submitted, it failed because it was inconsistent with a term of the sale agreement, in consideration of which (by hypothesis) the parties had entered into the "agreement" recorded in the side letter. He relied on Hoyt's Pty Ltd v Spencer [1] . Alternatively, Mr Pesman submitted, there was no consideration given for the relevant promises set out in the side letter, and they were thus unenforceable. 2. Mr Duggan appeared to accept that para (a) of the side letter was unenforceable, for either or both of the reasons stated by Mr Pesman. However, he submitted, para (b) could stand on its own. Decision 1. In my view, the side letter affords no answer to EFP's claim for payment of the balance of the deferred payment. Clause 10 of the sale agreement grants (or purports to grant) Pro-Pac a license to occupy the premises. A promise, or further promise, to grant that same licence could not be good consideration to support para (a) of the side letter. 2. In my view, it is not legitimate to read the two paragraphs separately. Plainly, the second follows on from, and is inseverable from, the first. Thus, in my view, the defect of want of consideration affects para (b) also. 3. In any event, I think, the Hoyts v Spencer problem is insuperable. As Isaacs J pointed out in that case [2] , where entry into the main contract is the consideration for the collateral contract, the former "must be taken exactly as it is", and the parties must "have and be subject to all (not some only) of the respective benefits and burdens of the main contract" (his Honour's italics). It followed, his Honour said [3] , that although the collateral contract may alter the contractual relationship of the parties, it cannot alter "the contractual relations which are established by the main contract". 4. Isaacs J said, further [4] , that "a collateral contract… , being supplementary only to the main contract, cannot impinge on it, or alter its provisions or the rights created by it" (again, his Honour's italics). Thus, where entry into the main contract is the consideration for the collateral contract, "it is a wholly inconsistent and impossible contention that the other party is not to have the full benefit of the main contract as made" [5] . 5. That "wholly inconsistent and impossible contention" lies at the heart of Mr Duggan's submissions on this point, and at the heart of Pro-Pac's defence to the claim for the balance of the deferred payment. It is fatal to both. Issues 4 to 7: the Baiada representation 1. By the time of closing submissions, Mr Pesman accepted that the court would find that Mr Beecham had made the Baiada representation. He was wise to do so. The representation, which Mr Beecham made in the meeting of 27 May 2013, is to the effect set out in the fourth issue. Relevant provisions of the sale agreement 1. Clause 2.2 of the sale agreement dealt with Conditions Precedent. So far as it is relevant, that clause provided: (a) Completion of this agreement is conditional on each of the Conditions Precedent having been satisfied or waived in accordance with this clause 2.2. (b) The parties will use their respective best endeavours to seek to have the Conditions Precedent satisfied as soon as possible. (c) Subject to clause 2.2(d), the Conditions Precedent are for the benefit of the Buyer only and may only be waived (whether in whole or in part) by the Buyer by notice in writing to the Seller. (d) If a Condition Precedent has not been satisfied or waived in accordance with this clause 2.2 on or before the Completion Date, then the Buyer may give the Seller notice in writing at any time before the Completion Date that the Buyer intends to rescind this agreement if the relevant Condition Precedent has not been satisfied or waived by a date specified in that notice being a date at least five Business Days from such notice. If the Condition Precedent is not satisfied or waived by the date so specified, then the Buyer may at any time after that date (though before Completion) rescind this agreement by written notice to the Seller. 1. The expression "Conditions Precedent" was defined to mean, so far as is now relevant, the following: (a) completion of due diligence investigations by the Buyer on the Business to the satisfaction of the Buyer; (b) the Key Person entering into a service agreement with the Buyer as and from Completion, on terms and conditions acceptable to the Buyer; … (d) the Seller is to procure the assignment of the Material Contracts to the Buyer or otherwise procure the key customers to continue to trade with the Business under the Buyer's ownership; 1. The "Key Person" was Mr Beecham. He did enter into the required service agreement. The Key Customers were (either by force of the sale agreement or as a matter of fact; it does not matter) Baiada and Inghams. 2. Clause 7.1 dealt with warranties. It provided: 7.1 Warranties (a) The Seller represents and warrants to the Buyer that the Warranties are true and accurate on each of the date of this agreement and the Effective Date and on each day up to Completion and on the Completion Date. (b) The Seller acknowledges that the Buyer has entered into this agreement in reliance on clause 7.1(a). (c) Each Warranty must be construed independently and is not limited by reference to another Warranty. (d) The Warranties survive Completion of this agreement. 1. The warranties were set out in schedule 1 to the sale agreement. The warranty on which Mr Duggan relied was cl 3.1: 3.1 Full Disclosure (a) All copies of documents and information provided by or on behalf of the Seller to the Buyer are complete, accurate and true copies in all material respects and are not false, misleading or deceptive. (b) The Seller has provided the Buyer with all information which might reasonably be expected to materially and adversely affect either the Business of the value of the Assets or which might otherwise be material to a prospective purchaser of the Business and the Assets. 1. It was common ground that Pro-Pac had pleaded, in its cross-claim, para (a) of cl 3.1, but not para (b). Mr Pesman submitted that the court should not accede to Mr Duggan's "implicit" application to amend the cross-claim so as to rely upon the whole of cl 3.1. The parties' submissions 1. Mr Pesman submitted that, properly construed, cl 3.1(a) referred only to copies of whatever documents or information had been given by EFP to Pro-Pac in the course of negotiations. He submitted that it was not, on its proper construction, a warranty of the accuracy of any information provided. Mr Pesman submitted, correctly, that the sale agreement had been drafted by Pro-Pac's legal advisers (then known as Thomson Lawyers) on the instructions of Pro-Pac. 2. Mr Duggan submitted that para (a) operated: 1. as a warranty of the complete and accurate character of all documents supplied; and 2. independently, as a warranty of the accuracy of all information provided. 1. Alternatively, Mr Duggan submitted, the Baiada representation was promissory, and had effect as a contractually enforceable promise. Decision 1. Clause 3.1(a) is difficult to construe. If considered literally, the plural verb form ("are") would suggest that there is a plural subject ("all copies of documents and information…"). On that basis, it could be construed as a warranty of the completeness and accuracy of those "copies", insofar as they were copies of documents or copies of information provided by EFP to Pro-Pac. Some support for that approach is gained from the composite character of the warranted qualities of that material (to use a neutral term): that it be "complete, accurate and true copies in all material respects". The double reference to "copies" suggests that the warranty is concerned only with the accuracy of the copies provided (whether of documents or of information), in their capacity as copies. 2. The idea of "copies of documents" is not difficult to understand. Nor, I think, is the idea of "copies of information". In each case, the warranty, construed as Mr Pesman would construe it, says only that those copies are complete, accurate and true, and that considered in their character as copies, they are not false, misleading or deceptive. 3. That is a complete and syntactically harmonious construction of the paragraph. It gives each part of the paragraph some work to do. However, the effect is that the warranty would have somewhat limited application. 4. If Mr Duggan's construction were to be accepted, the paragraph should be read as though it commenced "all copies of documents, and all information, provided…". That of itself is a not a radical exercise in constructional surgery. However, that reading does not sit comfortably with the repetition of the word "copies". If that word did not appear a second time, it would be relatively simple, and an orthodox exercise in construction, to construe the paragraph purposively so that it was a warranty, first of the complete and accurate quality of copies of documents, secondly of the complete and accurate quality of information, and thirdly that neither those copies nor that information were or was false, misleading or deceptive. But the repetition of the word "copies" makes it very difficult to get to that conclusion. 5. The repetition of "copies" seems to me to confirm that the paragraph is concerned only with the accuracy of copies, be they copies of documents or copies of information, that were provided by EFP to Pro-Pac. I do not think that it is possible, consistently with that approach, to read the paragraph as containing an independent warranty of the accuracy (etc) of information in its character as information. 6. I accept that this approach to construction renders the warranty of less utility than does the construction propounded by Mr Duggan. I accept, further, that a consequence of reading the warranty in this way is that there is no independent warranty of the accuracy of information provided. However, if that is the proper legal effect of this aspect of the bargain that the parties struck then the court's function is to say so, not to rewrite it, even if the court considers it in some way to be "uncommercial". To adapt the sense of the majority reasons in Taylor v The Owners – Strata Plan No 11564 [6] , the fact that the protection afforded by the warranty may be less than some might think is "commercial" is not a reason for going beyond its words. 7. I conclude that there is no breach of the warranty contained in cl 3.1(a). 8. As to cl 3.1(b), it is not a warranty of the accuracy of the information provided. It is, instead, a warranty that EFP has given Pro-Pac all information which might materially and adversely affect its decision. I accept that this would have involved further cross‑examination. I accept Mr Pesman's submission that the assessment of breach of cl 3.1(b) would entail looking at the entirety of the information provided by EFP to Pro-Pac to see whether, taken overall, there was a breach of that warranty. I accept, further, that in the absence of a pleading of breach of cl 3.1(b), the court should not now permit Pro-Pac to rely upon it, in circumstances where the party affected – EFP – has not had to consider whether there is further material that could be put before the court to assist it to rule upon the question of breach. 9. I do not agree with Mr Duggan's alternative submission, that the Baiada representation had contractual effect in its own right. In terms, it is no more than a statement of fact. It is not promissory. And even if it were promissory, it would be deprived of legal effect by the entire agreement clause in the sale agreement. 10. The next question is whether the Baiada representation involved breach of s 18 of the Australian Consumer Law [7] . There is no doubt that the Baiada representation was untrue, because at the time it was made, the rebate demanded by and paid to Baiada was, for everywhere except Western Australia, 40%, not 30%. The question is whether that was misleading or deceptive, or likely to mislead or deceive Pro-Pac. 11. Plainly, I think, the representation was misleading or deceptive. It could not be regarded otherwise, in circumstances where it was simply false. 12. The question of loss can only be considered at the level of principle. And at that level, I am satisfied that the Baiada representation had no relevant impact on Pro-Pac's decision to proceed with the purchase of EFP's business. 13. The first point is that negotiations apparently commenced at some time in 2012. When they became serious, in March 2013, Mr Penn put what was called an "indicative proposal" to Mr Beecham which proposed that the consideration of $6 million would be paid in part "up front" and in part over the three years following completion of any purchase, with an amount to be paid that varied according to whether the business achieved either 100% or 75% of its forecast sales and gross profit percentage. 14. Mr Beecham's evidence (given in cross-examination, but not thereafter challenged) was that the rebate was a matter of no concern to him, because he worked out his prices by calculating the margin that EFP required on its cost, and then in effect grossing up the resulting sum so that it would allow for a rebate back to Baiada at whatever the required rate might be. That is one aspect of Mr Beecham's evidence that I do accept. It seems to me to be inherently plausible, or consistent with the probabilities viewed objectively. It follows that the focus on gross profit percentage (or gross margin) in Pro-Pac's indicative offer matched Mr Beecham's way of constructing his prices. 15. On 14 April 2013 [8] , Pro-Pac submitted a revised offer. The overall figure remained the same. The period for payment of the incentive shortened from three years to two. Again, any incentive payment depended on achievement of either 100% or 75% of the forecast gross margin. There were other conditions, but they are irrelevant. Mr Penn confirmed in cross-examination that this fundamental structure for the transaction never changed. It follows that his focus was always on the gross margin. 16. In my view, the context in which the Baiada representation was made is significant. At the meeting of 27 May 2013, Mr Penn and Mr Saus queried the fact that the margins on Baiada's business seemed abnormally high. It does not appear that they had been made aware of the rebates before that meeting; their question was asked not because they had found out something about rebates being paid, but because of the apparently abnormally high margins on the gross sales to the major customer. This again confirms the view that Mr Penn's focus (and, to the extent that he contributed to the decision-making process, Mr Saus') was firmly on the gross profit margin. 17. Mr Penn did not thereafter reformulate his offer. Nor did he carry out any investigation of the rebate. In my view, Pro-Pac's attempt now to seize upon the rebate issue as an excuse for not paying what it owes involves an opportunistic exercise in rewriting history. 18. I add that in case that it should be thought that I am wrongly taking into account pre-contractual negotiations, the incentive payment structure set out in the March and April proposals was in fact embodied in the commission agreement that was made contemporaneously with the sale agreement and the other agreements to which I have referred earlier in these reasons. That, no doubt, is why Mr Penn confirmed that the essential structure of the transaction did not change between March 2013 and 19 June 2013. 19. The irrelevance of the Baiada representation, as a factor inducing Pro-Pac to proceed with the purchase of EFP's business, is confirmed by Mr Penn's board paper of 12 June 2013, seeking approval to proceed. That is the document I have referred to already on the topic of Mr Penn's credibility [9] . Of present relevance, the board paper gave a number of reasons for proceeding with the purchase. One of those reasons was that EFP's business had: High GP and profit % to sales. 1. In other words, it was the gross profit, or margin, that Mr Penn saw as being an attraction of the purchase. For the reasons I have given already [10] , that margin was not affected adversely by the rebate because of the way in which the selling price to Baiada was constructed. 2. Mr Penn's board paper included a detailed sensitivity analysis showing "various sensitivities for changes in sales, margin and inventory required and the effect that this has...". The projected gross profit percentages in that sensitivity analysis range from a low of 23% to a high of 27.5%: that is to say, the range was effectively centred on the 25% gross profit margin that formed a basis of the initial indicative and revised offers [11] . 3. I accept, of course, that if the practice of paying rebates had had any significant adverse impact on the expected gross profit margin, this would have been a matter of great concern to Pro-Pac. But there was no evidence to demonstrate that the expected margin (or for that matter a margin of 27.5%, the highest recorded in Mr Penn's board paper) was unachievable if rebates were paid at 40% rather than 30% of gross selling price. The conditions precedent issue 1. Mr Duggan relied on the conditions precedent and on what he said was the non-satisfaction of one of them. Mr Pesman submitted that those conditions precedent had not been pleaded, nor had breach of them; and in any event there was no breach. 2. The short answer to this is that the conditions precedent are conditions precedent to completion of the sale agreement, and have no effect thereafter. Specifically, cl 2.2(d) required them to be satisfied or waived on or before the "Completion Date". That was defined in cl 1 to mean 17 June 2013, or any other date agreed in writing to be the date of Completion. There was no such agreement in writing. 3. Even if the Completion Date were, in some way unexplained by the evidence, transformed from 17 to 19 June 2013, the point goes nowhere in fact. First of all, the conditions precedent, if not satisfied, would have entitled Pro-Pac to decline to complete. They have no ongoing relevance. Secondly, in an email that Mr Saus sent to Mr Zwi of Thomsons Lawyers on 19 June 2013, the relevant "CP" was said to be "not applicable". That can only mean that Mr Saus did not regard the status of that condition precedent as an obstacle to completion. Decision on the Baiada representation 1. I conclude that the Baiada representation was made; that it was false when made; that it was thus misleading or deceptive; but that it was not a breach of the warranty set out in cl 3.1(a). Nor did it have any independent contractual effect. I conclude, further, that notwithstanding the misleading or deceptive character of the representation, it had no relevant effect, because Pro-Pac did not rely on it in deciding to make and complete the sale agreement. 2. The issues relating to the Baiada representation raised the question of breach of a common law duty of care, and a separate question as to the liability of the cross-defendants for any breach of contract, breach of s 18 of the Australian Consumer Law or breach of a common law duty of care. None of those matters were argued, and I do not propose to deal with them. Issues 8 to 11: the Inghams representation 1. The Inghams representation is said to have been made by Mr Beecham at the meeting of 27 May 2013. Messrs Penn and Saus said that during that meeting, Mr Beecham showed them (on the screen of his laptop) a spreadsheet "which contained prices for products supplied to Inghams". 2. Messrs Penn and Saus said that, having been shown the spreadsheet, Mr Penn said "are these prices agreed and locked in with Inghams?", and that Mr Beecham replied "yes, I have agreed these new prices with Inghams". It is Mr Beecham's asserted agreement with the proposition that the prices were "agreed and locked in with Inghams" that is relied upon as the Inghams representation. 3. The only evidence for the making of the Inghams representation is the uncorroborated (except by each other) testimonial evidence of Messrs Penn and Saus. I have noted already the uncanny and implausible similarity between their purported memories of the conversation in question [12] . 4. There was ample circumstantial evidence, and evidence in contemporaneous documents, to corroborate their accounts the making of the Baiada representation. (That, no doubt, was one of the reasons why Mr Pesman conceded that I would find that it had been made.) By contrast, there was no such evidence to support their accounts of the making of the asserted Inghams representation. 5. To my mind, it is of great significance that although Mr Saus made detailed notes of the meeting of 27 May 2013, those notes contain no reference whatsoever to the Inghams representation. Having observed Mr Saus in the witness box, I simply do not accept that he could have overlooked the representation were it made (unless, perhaps, he regarded it as a matter of absolutely no significance). The absence of any reference to that representation either in Mr Saus' notes or in subsequent documents exchanged between the parties is, in my view, telling. 6. In assessing the whole of the evidence relating to the Inghams representation (and indeed on the other issues), I take into account the passage of time, the impact of perceptions of self-interest on the reliability of memory, and more generally the other factors to which McClelland CJ in Eq referred in Watson v Foxman [13] . It is not necessary to set out the well known passage. 7. Considering the evidence as a whole, I conclude that the Inghams representation was not made. 8. As with the Baiada representations, the stated issues on the Inghams representation raised a question of breach of a common law duty of care, and a separate question as to the liability of the cross-defendants. Those matters were not argued, and I did not propose to deal with them. Issues 12 to 16: the employment agreement Relevant terms of the employment agreement 1. The relevant provision is cl 9 of the employment agreement made between Pro-Pac and Mr Beecham as part of the suite of agreements concluded on 19 June 2013. Clause 9 provided: 9. LOAN 9.1 On the Completion Date, the Executive will receive a loan of $200,000.00 from the Company (Loan). The Loan will be a maximum term of 3 years. 9.2 The outstanding amount of the Loan will accrue interest at a rate of 6.45 per annum until repaid in full. Interest will accrue and be capitalised (but not be paid) monthly. 9.3 The Executive irrevocably undertakes to direct any entitlements which he (or any company or person associated with him) receives or is entitled to receive from the Existing Company pursuant to the Existing Company receiving any commission to which it may be entitled under this or separate agreement with the Company pertaining to the future performance of the Business, as a first charge to repay the Loan (including interest) or any part thereof which has not been repaid by the Executive by the due date for such repayment. The parties' submissions 1. Mr Beecham's defence was based on an asserted estoppel. That estoppel was said to arise out of representations said to have been made by Mr Penn, to the effect that the sum of $200,000 was not a loan but an advance on incentive payments that Mr Beecham might earn in the course of his employment, and was only to be repaid out of those payments. 2. Mr Pesman referred to the indicative proposal of 6 March 2013 [14] . Part of that proposal was that there should be an employment agreement whereby Pro-Pac agreed to employ Mr Beecham as the "General Manger [sic]" of its "Tray Division or whatever is a suitable name for the division". The proposal included a salary package, and in addition something described as "OTE Bonus" of $50,000. The email then referred to: Pre-Payment: $200,000 advanced on earn out to be deducted from future earn outs earned. 1. Mr Pesman submitted that if cl 9 were to be construed as an agreement for loan (and it is very hard to see how it could be construed otherwise), then by reason of those representations, Pro-Pac was estopped from enforcing its rights as lender. 2. Mr Duggan submitted that the evidence of pre-contractual representations was inadmissible in circumstances where the parties had recorded their bargain in a written contract that was expressly declared to contain the whole of their agreement. He relied on what McClelland J said on this topic in Johnson Matthey Ltd v AC Rochester Overseas Corporation [15] . 3. In any event, Mr Duggan submitted, the alleged estoppel was not proved. Mr Beecham had not been misled, or induced to act to his disadvantage, by whatever might have been said during the pre-contractual negotiations. Mr Duggan referred to later emails in which Mr Beecham had characterised, or agreed to the characterisation of, cl 9 as a loan bearing interest. 4. Mr Pesman submitted, in reply, that the application of the parol evidence rule in the field of estoppel was nowhere near as clear as McClelland J had stated in Johnson Matthey. He relied on what Rolfe J said in Whittet v State Bank of New South Wales [16] . Decision 1. I accept that there is a conflict in the authorities as to the extent to which evidence of pre-contractual negotiations is admissible to establish an estoppel that seeks to subvert the terms of a written contract that is expressed to embody the whole of the parties' agreement. In addition to the authorities already cited, there is the decision of Bryson J in Australian Co-operative Foods Ltd v Norco Co-operative [17] . His Honour considered the question, and the authorities to that time, and concluded [18] that the view expressed by McClelland J in Johnson Matthey was correct and should be followed. 2. Allsop J, with whom Drummond and Mansfield JJ agreed, referred to the dispute and to the conflicting authorities in Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [19] . His Honour said [20] that in view of his conclusions as to the proper construction of the relevant contract, it was unnecessary to decide the controversy. A similar approach was taken by Ball J in Golden Horizon Finance Co Ltd v Financial & Energy Exchange Limited [21] . 3. I do not accept Mr Beecham's evidence that the representations said to give rise to the estoppel were made. Nor do I accept that when he signed the employment agreement, he believed that cl 9 was no more than an advance against future performance incentives, and repayable only out of them. 4. The only corroborative evidence comes from the email of 6 March 2013 to which I have referred [22] . I accept that the email provides some support for the view that, as at March 2013, the parties were contemplating an advance which would be repayable (and, perhaps repayable only) out of incentive payments. However, things moved on. The later documents, to which I shall turn in a moment, show that the parties decided to treat the advance as a loan, repayable on demand, and accruing interest in the meantime. 5. The first of those documents is an email of 18 June 2013 from Mr Beecham to Mr Saus. That email instructed Mr Saus how the amounts payable on completion were to be paid. As to the cl 9 (of the employment agreement) payment, Mr Beecham said: Please direct my loan Payment to… [an identified bank account]. 1. Mr Beecham seems to have had no doubt at all as to the proper characterisation of the cl 9 advance. 2. The next day, 19 June 2013, apparently in preparation for completion of the transaction, Mr Saus sent an email to Mr Beecham. That email dealt with the "final requirements" for settlement. Of present relevance, it stated: There is however only one minor point of clarification that relates to your service agreement. The interest rate applied to your loan of $200,000 is the ATO published FBT benchmark interest rate currently at 45%. This is the rate at which no FBT is payable by the company and fluctuates from time to time. (See the attached) Your service agreement currently states that the interest rate applicable to your loan is 6.45%. It should state that the interest rate applicable to your loan is to the ATO published FBT benchmark interest rate as published from time to time. The current rate applicable for 2013/14 is 6.45%. If you are in agreement with the above, please confirm by return email and we can make the changes by hand when we meet next rather than delay the process. 1. Mr Beecham replied, an hour later, with the single word: Agreed. 1. Two things follow. The first is that any lingering misapprehension that may have existed from any pre-contractual representation, as to the proper character of and obligations in relation to the amount to be paid under cl 9 of the employment agreement, must have been dispelled. The second, and related, is that whatever representations may have been made on that topic could not have induced Mr Beecham to act to his detriment by signing the employment agreement on the basis that it was merely an advance against incentive payments and not a loan repayable in accordance with its terms. The express statement of the terms in the email of 19 June 2013, and his statement of agreement to them, is inconsistent with that. 2. In the circumstances, the estoppel defence fails at the level of fact. It is therefore unnecessary to consider whether, in principle, the evidence necessary to ground it is admissible. I add that if the defence had relied upon asserted misleading or deceptive conduct in contravention of the Australian Consumer Law, the Johnson Matthey issue would not be relevant. However, framing the argument in terms of s 18 would achieve nothing. For the reasons I have given, Mr Beecham was not misled or deceived in any relevant way. 3. The issues relating to the employment agreement raise a question of fraudulent misappropriation and a separate question of breach on Mr Beecham's part. Those matters were not argued, and I do not propose to deal with them. Conclusion and orders 1. Effectively, I have dealt with those issues that, by reason of the orders made on 26 June 2017, were to be dealt with separately and before the determination of the other issues in dispute. As I have noted, the parties have agreed that those other issues should be resolved through the contractual process of expert determination. 2. In principle, therefore, the appropriate course is to state each of the issues with which I have dealt as a separate question, and to record my decision on it as required by UCPR r 28.3. I note that r 28.4 is not applicable. 3. Having done that, the matter should be adjourned for directions to a date sufficiently far in the future to allow the process of expert determination to proceed to a conclusion. I will hear the parties on the appropriate date. I will also, if required, hear the parties on the question of costs, although my tentative view is that costs should be reserved. 4. I direct that the following questions be decided separately from and before the decision of all other issues in the proceedings, and direct that the decision on each question be recorded: 1. Question: did the parties reach an agreement with terms contained in the document entitled "Side Letter – Refund of Deferred Payment"? Decision: no, in that the "agreement" recorded in that Side Letter is not enforceable. 1. Question: if so, what is the effect of that agreement in relation to the Deferred Payment? Decision: none. 1. Question: is Pro-Pac liable to pay EFP for all or part of the Deferred Payment? Decision: yes. 1. Question: did Mr Beecham make the Baiada representation to Pro-Pac prior to 19 June 2013? Decision: yes. 1. Question: was the Baiada representation made: 1. in breach of warranty cl 3.1(a)? Decision: no. 1. in contravention of s 18 of the Australian Consumer Law? Decision: yes. 1. in breach of a common law duty? Decision: not necessary to answer. 1. Question: what, if any, loss has resulted to Pro-Pac from that contravention? Decision: none. 1. Question: what liability does each of the cross-defendants have for that loss? Decision: does not arise. 1. Question: did Mr Beecham make the Inghams representation? Decision: no. 1. Question: was the Inghams representation made in breach of the Truth and Accuracy Warranty or in contravention of s 18 of the Australian Consumer Law or in contravention of a common law duty? Decision: does not arise. 1. Question: if so, what loss has resulted to Pro-Pac? Decision: does not arise. 1. Question: what liability does each of the cross-defendants have for any such loss? Decision: does not arise. 1. Question: was it an express term of the Employment Agreement that Pro-Pac would lend Mr Beecham $200,000? Decision: yes. 1. Question: does Mr Beecham owe Pro-Pac $200,000 plus interest? Decision: yes. 1. Question: is Pro-pac estopped from claiming the sum of $200,000 plus interest? Decision: no. 1. Question: did Mr Beecham fraudulently misappropriate $270,435.92 from Pro-Pac? Decision: not necessary to answer. 1. Question: did Mr Beecham breach the employment agreement? Decision: not necessary to answer. ********** Endnotes 1. (1919) 27 CLR 133. 2. At 145–146. 3. At 146. 4. At 147. 5. At 147. 6. (2014) 253 CLR 531 at [44] (French CJ, Crennan and Bell JJ). 7. Competition and Consumer Act 2010 (Cth), Schedule 2 8. The email is wrongly dated 2012. 9. See at [14] above. 10. At [59] above. 11. See at [58] to [60] above. 12. See at [17]-[18] above. 13. (1995) 49 NSWLR 315 at 319. 14. See at [58] above. 15. (1999) 23 NSWLR 190. 16. (1991) 24 NSWLR 146. 17. (1999) 46 NSWLR 267. 18. At 279. 19. (2001) 117 FCR 424 at [444] - [446]. 20. At [447]. 21. [2016] NSWSC 593 at [59]. 22. At [58]; [83] above. 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: 12 July 2017