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FEDERAL COURT OF AUSTRALIA
Cortem SpA v Controlmatic Pty Ltd [2010] FCA 852
Citation: Cortem SpA v Controlmatic Pty Ltd [2010] FCA 852 Parties: CORTEM SPA v CONTROLMATIC PTY LTD (ACN
124 091 032) and GIUSEPPE VENUTI File number: VID 414 of 2008 Judge: JESSUP J Date of judgment: 13 August 2010 Catchwords: TRADE PRACTICES – Australian distributor of
imported goods applying principal’s name to locally-manufactured goods – Distributor selling locally manufactured goods in place of goods manufactured by principal – Whether amounted to misleading or deceptive conduct or to false claim of association – Distributor a one-man company – Whether director/shareholder liable as accessory. TORTS – Passing off – Company passing off own goods as those of another – Liability of director of company – Availability of damages as against director. RESTITUTION – Imported goods requiring certification under Australian legislation – Australian distributor performing work and incurring expense in connection with legislation – Whether entitled to remuneration/reimbursement – Existence of foreign contract contemplating such work but making no provision for payment – Whether restitutionary claim lies – Whether sufficient proof of work done and expenses incurred. SALE OF GOODS – Warranty that goods would conform to regulations – Whether goods failed to conform – Whether purchaser notified supplier – Supply of goods from overseas – Applicability of Vienna Convention.
Legislation: Sale of Goods (Vienna Convention) Act 1986 (NSW)
Sched 1 Trade Practices Act 1974 (Cth) ss 6, 52, 53, 75B, 80, 82
Cases cited: Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221
Conagra Inc v McCain Foods (Aust) Pty Ltd (1992) 33 FCR 302
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Keller v LED Technologies Pty Ltd [2010] FCAFC 55 Reckitt & Coleman Properties Ltd v Borden Inc [1990] 1 WLR 491 Re Wakim (1999) 198 CLR 511 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Date of hearing: 26 & 27 October 2009 and 6, 7, 8, 9, 21 & 27 April 2010 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 104 Counsel for the Applicant: Mr Iain R Jones SC Solicitor for the Applicant: Rigby Cooke Lawyers Solicitor for the Respondents:
The First Respondent did not appear. The Second Respondent was self represented.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION VID 414 of 2008
BETWEEN: CORTEM SPA
Applicant/Cross-Respondent
AND: CONTROLMATIC PTY LTD (ACN 124 091 032) First Respondent/First Cross-Claimant GIUSEPPE VENUTI Second Respondent/Second Cross-Claimant
JUDGE: JESSUP J
DATE OF ORDER: 13 AUGUST 2010
WHERE MADE: MELBOURNE
THE COURT ORDERS THAT:
1. The second respondent be restrained from –
(a) aiding, abetting, counselling or procuring a trading corporation to do, and from
(b) inducing, or attempting to induce, a trading corporation to do, and from
(c) being in any way, directly or indirectly, knowingly concerned in, or party to, a
trading corporation doing,
any of the things set out in the schedule to this order.
SCHEDULE
(i) Representing in trade or commerce that goods not made by or with the
authority of the applicant were so made.
(ii) Representing in trade or commerce that goods are of a model of the
applicant’s, when the goods are not of that model.
(iii) Representing in trade or commerce that goods have an approval obtained by or
in the name of the applicant when the goods do not have that approval.
2. Pursuant to s 82 of the Trade Practices Act 1974 (Cth), the second respondent pay
damages fixed in the sum of $222,558.18 to the applicant.
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3. The Application otherwise be dismissed.
4. The cross-respondent pay damages fixed in the sum of $12,775.29 to the second
cross-claimant.
5. The Cross-Claim otherwise be dismissed.
6. The second respondent be permitted to set off the sum due to him under Order 4
above against his liability to the applicant under Order 2 above.
7. Execution of judgment under Order 4 above be stayed pending the second
respondent’s compliance with Order 2 above.
8. Within 7 days, the applicant file and serve a memorandum setting out its claim, if any,
for costs in the proceeding.
9. Within a further 7 days, the second respondent file and serve a memorandum
responding to the applicant's memorandum and setting out his claim, if any, for costs
and/or expenses in the proceeding.
10. Within a further 7 days, the applicant file and serve a memorandum in response to any
such claim by the second respondent and the reply, if any, to the second respondent's
response to its own claim.
11. The second respondent have leave within a further 7 days, to file and serve a
memorandum in reply to the applicant's response.
12. The parties have leave to apply for interest to be added to the sums to which they are
entitled under the above orders, such applications, if any, to be made in conjunction
with the submissions on costs as provided for above. The above preceding Orders
8-11 apply mutatis mutandis to any such claim for interest.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION VID 414 of 2008
BETWEEN: CORTEM SPA
Applicant/Cross-Respondent
AND: CONTROLMATIC PTY LTD (ACN 124 091 032) First Respondent/First Cross-Claimant GIUSEPPE VENUTI Second Respondent/Second Cross-Claimant
JUDGE: JESSUP J
DATE: 13 AUGUST 2010
PLACE: MELBOURNE
REASONS FOR JUDGMENT
INTRODUCTION
1 The applicant, Cortem SpA (“Cortem”), is an Italian company engaged in the
manufacture and international distribution and sale of lighting fixtures, light and sound
warning devices and watertight protection. Specifically in the context of the present
proceeding, Cortem manufactures, distributes and sells explosion-proof junction boxes
(or “enclosures”) adapted to house electrical switches, connections etc. Until 2002, Cortem
had no channel of distribution in Australia. In April of that year, it appointed the second
respondent, Giuseppe Venuti, as its Australian distributor. Mr Venuti carried on business
under the name “Controlmatic”. Subject to the difficulties which have led to the present
litigation, Mr Venuti was Cortem’s Australian distributor until February 2007, when he
caused the first respondent, Controlmatic Pty Ltd, to be incorporated. He was its only
shareholder and director. Although there was no documentary evidence of a change in
Cortem’s distributorship arrangements, it was Controlmatic Pty Ltd which effectively took
over Mr Venuti’s business on 1 April 2007 and, again subject to the issues which are
presently controversial, acted as Cortem’s Australian distributor until 21 December 2007,
when Cortem terminated the distributorship.
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2 Cortem took that step because Controlmatic Pty Ltd had not maintained the minimum
levels of Australian sales of Cortem products specified in the agreement originally made as
between Cortem and Mr Venuti. Indeed, as will appear, there had been, in 2007, a distinct
diminution in the level of sales of Cortem junction boxes in Australia. Unbeknown to
Cortem at the time, that was at least partly because Controlmatic Pty Ltd had commenced to
manufacture its own junction boxes in Australia, and to supply them to industrial customers
bearing the Cortem logo. The result was that Controlmatic Pty Ltd placed no further orders
for the corresponding junction boxes with Cortem in Italy. These circumstances came to the
attention of Cortem only in January 2008, and subsequently led to the commencement of this
proceeding.
3 In its application dated 10 June 2008, Cortem relied upon several causes of action, but
the only ones pressed at trial were those arising under ss 52 and 53 of the Trade Practices Act
1974 (Cth), under corresponding provisions of the Fair Trading Act 1999 (Vic), and in
passing off. The essence of Cortem’s complaint is that the respondents have held up their
own products as Cortem’s, and have made sales of those products under the Cortem name
and logo. It is said that this involved misleading and deceptive conduct in trade or
commerce, and associational representations of the kind proscribed by s 53 of the Trade
Practices Act. Cortem seeks injunctions, damages and declarations.
4 By cross-claim dated 25 July 2008, the respondents claimed payments, in the nature
of remuneration and/or compensation, for expenses incurred, and for Mr Venuti’s time spent,
in securing the safety certification of Cortem products with the relevant Australian regulatory
authority, “TestSafe Australia” (“TestSafe”). Cortem products not previously having been
marketed in Australia, when Mr Venuti first commenced as Cortem’s Australian distributor
in 2002, it was necessary to secure that certification and, it seems, this process was
complicated to a degree, in part at least because the products in question, or some of them,
did not comply with Australian requirements. The respondents claimed that much work was
done to secure Australian certification, and that expenses were outlaid, and that they were
entitled to remuneration and/or compensation on the ground that, otherwise, Cortem would be
unjustly enriched.
5 A second element of the respondents’ cross-claim related to Cortem products which
had been purchased by Mr Venuti or by Controlmatic Pty Ltd, and which remained unsold at
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the time when the latter went into liquidation. They alleged that these products were faulty or
defective in ways to which I shall refer below. Only Mr Venuti’s claim was pressed. He
sought recovery from Cortem of the amount which he paid for these products. In its Defence
to the cross-claim, Cortem said that Mr Venuti did not raise any quality issues with it, save
for five instances which were appropriately addressed. It also resisted the proposition,
implicit in Mr Venuti’s claim, that any Australian sale of goods legislation applied to the sale
of these products by Cortem, and contended that Mr Venuti’s allegations did not disclose a
cause of action under Australian law.
6 On 28 October 2008, Mr Venuti, as the single member of Controlmatic Pty Ltd,
resolved in a general meeting, that the company be wound up voluntarily and that a liquidator
be appointed. In a summary of affairs signed by Mr Venuti on 21 October 2008, it was stated
that Controlmatic Pty Ltd had creditors to the value of $284,711.17. From that point, save to
comply with orders made by the court to facilitate the applicant’s inspection of premises and
plant, the liquidator took no further part in the proceeding. The cross-claim by Controlmatic
Pty Ltd was not pressed, and Cortem’s claim against the company was stayed pursuant to
s 471B of the Corporations Act 2001 (Cth). From this point, both the main application and
the cross-claim proceeded as between Cortem and Mr Venuti.
THE FACTS
7 On 3 April 2002 at Milan, Cortem and Mr Venuti entered into an Italian contract
described as a “sales agency agreement”. There is not an English translation of that
agreement before the court, but there is such a translation of a replacement agreement made
between the same parties at Milan on 4 September 2003, and which, according to Antonio
Nigro, the export sales and marketing manager for Cortem, was substantially the same as the
agreement of April 2002. That agreement is presently of interest for historical purposes only,
but, it is significant in that context at least that it was accompanied by a document, signed by
each of the parties, headed “Letter of Appointment for Technical Assistance”. To the extent
presently relevant, as translated the letter provided as follows:
With this letter we appoint CONTROLMATIC (Australia) to support CORTEM SpA in obtaining the appropriate anti explosive certificates recognised in Australia. The work undertaken will be paid as follows: 1. Starting from April 2002 CONTROLMATIC will issue monthly invoices for reimbursement of telephone expenses, trips to TestSafe laboratory and
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anything else documented and strictly related to their technical work on behalf of CORTEM. Such expenses will be detracted from commission earned. Expenses not provided for under the previous paragraph will have to be agreed upon in advance with CORTEM. It is obvious that all expenses authorised and undertaken on CORTEM’s behalf (purchase of materials, custom clearance of samples, etc) will be reimbursed immediately. 2. Starting from April 2002, we will recognise a monthly allowance for technical assistance of A$2000 to be paid on invoice. The refunds and payments provided for under 1-2 will be valid for a period of 5 months (April-August) from the date of this letter, unless we advise otherwise. All requests for reimbursement/compensation provided for under 1,2 will have to reach us monthly in one invoice only; expenses to be refunded need to be accompanied by the appropriate documentation. CONTROLMATIC will need to send us complete monthly reports of their activities, detailing at the very least the state of the certification activities in relation to the planned objectives. This Letter of Appointment remains valid until the certification procedure will be completed.
8 On 30 June 2002, Cortem provided the following written authority to Mr Venuti:
CORTEM S.p.A. authorizes the company CONTROLMATIC in the name of Mr. Joe Venuti, to act on his behalf carrying out all the necessary practices to obtain the Australian Certificates at the Laboratory TESTSAFE. This authorization, where necessary, is extended also to the formalization of the order and the execution of possible advance payments.
9 Pursuant to the authority referred to in the previous paragraph, on 7 August 2002,
Mr Venuti applied to TestSafe for certification of some of the Cortem products which he
proposed to distribute in Australia. These applications were made under the then applicable
“AUS Ex” scheme of certification. They were made in the name of Cortem, and were signed
by Mr Venuti as its agent. In due course the charges imposed by TestSafe for its certification
services were invoiced to Cortem in Italy and, I infer, duly paid by it.
10 Of the applications made on 7 August 2002, six ultimately proceeded to certification
in the period November 2003 to December 2006. Those six applications, and the dates and
details of the TestSafe certificates and reports, were as follows (ordered by reference to
Mr Venuti’s purchase order number):
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Purchase Order No.
AUS Ex Scheme Certification – Description of Equipment
Outcome
2002.08.01 S and GUA Series of Junction Boxes
Certificate of Conformity AUS Ex 03.3892 issued by TestSafe on 9 February 2004 together with Report No. 24662.
2002.08.02 CCA Series of Enclosures with Components
Certificate of Conformity AUS Ex 03.3893 issued by TestSafe on 27 November 2003 together with Report No. 23455.
2002.08.03 CCFE Series of Enclosures with Components
Certificate of Conformity AUS Ex 04.3894 issued by TestSafe on 22 January 2004 together with Report No. 23610.
2002.18.08 M0 Series of Command, Control and Signal Operators
Certificate of Conformity AUS Ex 03.3942U issued by TestSafe on 19 January 2004 together with Report No. 23455.
2004.01.11 Ex d IIC Adaptors, Plugs and Fittings
Certificate of Conformity AUS Ex 06.3977 issued by TestSafe on 9 December 2006 together with Report No. 26553 and 28058.
2004.01.13 Breather and Drain Valves Series ECD
Certificate of Conformity AUS Ex 04.3967U issued by TestSafe on 9 December 2004 together with Report No. 25351.
11 The remaining ten applications made on 7 August 2002 did not proceed to
certification. They were all withdrawn on 9 November 2006. The details of those ten,
ordered as before, are as follows:
Purchase Order No.
AUS Ex Scheme Certification – Description of Equipment
Outcome
2004.01.14 EYS and EZS Sealed Fittings Application for certification withdrawn on 9 November 2006.
2004.01.15 Sealed Fittings Type CP, TP, NPS, NCS and LPS
Application for certification withdrawn on 9 November 2006.
2004.01.12 Series R and B Three-Piece Connection Fittings
Application for certification withdrawn on 9 November 2006.
2005.05.19 & 2005.5.25
Luminaries Series EV, EW, EWA, EWN
Application for certification withdrawn on 9 November 2006.
2005.05.21 Plugs and Receptacles Series PY, SPY and FSQC, FP
Application for certification withdrawn on 9 November 2006.
2005.05.22 Lighting Fixtures for Fluorescent Tubes Series EVF
Application for certification withdrawn on 9 November 2006.
2005.05.18 Luminaries Series EXEL and EXEN Application for certification withdrawn on 9 November 2006.
2002.12.04 Round Floodlights Series RLEE Application for certification withdrawn on 9 November 2006.
2002.12.04 Rectangular Floodlights Series SLEE Application for certification withdrawn on 9 November 2006.
2004.15.01 RMM RFF Series of Sealed Nipples Application for certification withdrawn on 9 November 2006.
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12 Mr Venuti also made two further applications for AUS Ex certification, also in the
name of Cortem, on 20 and 30 September 2002. They proceeded to certification on
9 November 2004 and 21 September 2005, respectively. The details of those applications
were:
Purchase Order No.
AUS Ex Scheme Certification – Description of Equipment
Outcome
2002.09.05 Increased Safety Junction Boxes Series SA
Certificate of Conformity AUS Ex 04.3944 issued by TestSafe on 9 November 2004 together with Report No. 23985.
2004.01.14 Control and Signal Stations Series CSC, EFD, EFDC, EFSCO, EMH
Certificate of Conformity AUS Ex 05.3969-0 issued by TestSafe on 21 September 2005 together with Report No. 25526 and 26674.
13 The road to certification of the Cortem products was neither a smooth nor a speedy
one. In the case of each application, TestSafe responded with a lengthy list of issues that
were required to be addressed before certification could proceed. According to Mr Venuti’s
evidentiary case, he devoted considerable time to resolving these issues. It seems that, as
would be expected, much of this work involved modifications to the drawings and other
paperwork filed in connection with each application for certification, and that Mr Venuti
required the active cooperation of Cortem in this regard. There was very little attention given
in the evidence to the detailed narrative of this process, but, however that may be, Cortem did
not resist Mr Venuti’s broad proposition that he had spent a lot of time, in the period after
August 2002, making such changes as were necessary to secure the Australian certification of
the Cortem products, or, in the case of the applications which were withdrawn, attempting to
do so.
14 The letter of appointment for technical assistance to which I have referred in para 7
above provided for Mr Venuti (described therein as “Controlmatic”) to be reimbursed his
expenses, and to be paid a monthly allowance, in connection with the process of securing
certification of Cortem products with TestSafe. Purportedly pursuant to that letter, Mr Venuti
rendered invoices to Cortem with respect to each of the months May 2002 to October 2003,
in which he claimed the monthly allowance for technical assistance of $2,000. On each of
those invoices, Mr Venuti also claimed reimbursement of expenses, and provided an itemised
list of particulars in each case. These invoices were paid as presented until that dated 16
October 2002, which related to September 2002. Cortem did not pay the $2,000 monthly
allowance on that occasion, or on any subsequent occasion. I infer that this action on the part
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of Cortem was taken pursuant to the five-month limitation referred to in the letter of
appointment. Ultimately, Mr Venuti’s claims for the allowance were compromised on terms
which, in this proceeding, he alleged were “unconscionable”, namely, that he should issue a
credit note in the sum of $5,000 with respect to his claims over the nine months from
September 2002 to June 2003. That credit note was issued in December 2003.
Notwithstanding this difference between the parties, there was no suggestion that
Mr Venuti’s vouched claims for expenses were at any time rejected.
15 On 4 September 2003, Cortem and Mr Venuti executed a replacement sales agency
agreement. It was this agreement which governed their relations (and, I assume by some kind
of implicit novation, the relations between Cortem and Controlmatic Pty Ltd in 2007) from
then until it was terminated by Cortem in December 2007. Although Mr Venuti asserted that
he was obliged to execute this agreement by the unconscionable conduct of Cortem, there is
no documentary evidence of any contemporaneous protest by Mr Venuti in this regard, and
he allowed the agreement to stand, and received benefits under it, for a number of years.
Like the agreement of April 2002, it was governed by Italian law, and the parties subjected
themselves to the exclusive jurisdiction of the court of Gorizia. There is no suggestion that
any attempt was made to have the agreement voided or set aside, either in Italy or elsewhere.
In the circumstances, I have no choice but to treat the agreement as valid for the whole period
of its existence.
16 Some of the presently relevant terms of the agreement of September 2003 were the
following:
Art. 1 Area and agreed products 1.1 The Manufacturer appoints the Agent who agrees to promote the sale of anti explosion and sealed off products, (hereinafter “Agreed products”), (refer to CORTEM catalogue, last issue) according to CEI and CENELEC regulations in the following area: (hereinafter “Area”): NATION: AUSTRALIA …. Art. 2 Obligations of the Agent: 2.1 The Agent undertakes to promote, to the best of his ability and consistently with all reasonable instructions received from the Manufacturer, the sale of the agreed products in the area, and to protect the Manufacturer’s interests with the normal due diligence of a good businessman. …. Art. 3 Non-competition obligation: 3.1 The Agent undertakes, for the duration of this contract, not to represent, manufacture nor distribute, without previous written consent of the
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Manufacturer, products that compete with the agreed products, nor, in any case, to act, within the Area or elsewhere, directly or indirectly as Agent, commission agent, reseller, dealer nor in any other manner, in the interest of third parties who manufacture or distribute products that compete with the agreed products. 3.2 The Agent is, on the other hand, free to represent, distribute or manufacture non-competing products (as long as not in the interest of competing manufacturers), always provided that he gives prior notice to the Manufacturer (attachment No. 5) and that such activities do not undermine the regular discharge of the obligations undertaken with this contract. …. Art. 5 Minimum volume of business 5.1 The Agent undertakes to pass, in any given year, orders for an amount not less that what listed in Attachment 6, with the expectation that the parties may increase annually the basic minimum listed by previous agreement. The basic minimum adjusts automatically to the increases of the price list of the Principal. 5.2 In the event, at the end of the year, that the Agent has not achieved the basic minimum referred to in the previous paragraph (or the higher one subsequently agreed by the parties), the Manufacturer will have the right, at his discretion: A) to terminate this contract in accordance with art. 19, B) to cancel the sole agency agreement, or C) to cut down the Area taking out those sections where the Agent has achieved the least amount of business. 5.3 Art. 5.2 does not apply if the Agent can demonstrate that his inability to achieve the basic minimum was due to reasons outside his control (i.e. wars, natural disasters…, as well as the non attainment of the certifications required in Australia). …. Art. 10 Trademarks and distinguishing marks of the manufacturer: 10.1 The Agent must use trademarks, names or other distinguishing marks of the Manufacturer for the sole purpose of identifying and advertising the agreed products, within the scope of his activity as Manufacturer’s Agent, with the understanding that such use is in the exclusive interest of the Manufacturer. 10.2 The Agent undertakes not to register, nor to have registered, in his Area nor elsewhere, the trademarks, the names or the other distinguishing marks of the Manufacturer, nor to register or to have registered trademarks, names or distinguishing marks capable of being confused with those of the Manufacturer. …. Art. 12 Clients’ complaints: 12.1 The Agent is authorised to receive remarks or complaints from clients in relation to faults of the products supplied. He must inform immediately the Manufacturer and protect the latter’s interests while it is understood that the Agent will not be able to commit the Manufacturer without previous specific written authorization to that effect. …. Art. 19 Early dissolution of the contract 19.1 Each party may withdraw from this contract without notice, when there is a fair reason for immediate withdrawal or in the presence of the circumstances indicated in art. 19.2, informing the other party in writing by means of communication that ensure proof and date of receipt (i.e. registered letter with return receipt, courier, telex). 19.2 It is a fair reason for immediate withdrawal any breach of the contractual
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obligations of such seriousness as to not allow the continuation of the business relationship on mutual trust even on a temporary basis. The parties agree to consider in any case, and independently of the seriousness of the breach, fair reasons for immediate withdrawal breaches of articles 3, 5, 8, 1, 10 and 11 of this contract. Furthermore, it also constitutes fair reason for immediate withdrawal the breach of any contractual obligation, which the defaulting party does not remedy within a reasonable time, after having been asked to do so in writing by the other party. … Art.20 Applicable legislation – Court having jurisdiction 20.1 This contract is subject to the provisions of the Civil Code and of the specific sector, and to possible Economic General Agreements applicable to the parties. 20.2 For any dispute concerning this contract, the Court of Gorizia will be the competent tribunal, as “FORUM CONTRACTUS”.
17 At about the same time as the parties executed the agreement of September 2003, they
also signed a replacement “Letter of Appointment for Technical Assistance”. That letter
provided as follows:
With this letter we appoint CONTROLMATIC (Australia) to support CORTEM SpA in obtaining the appropriate anti explosive certificates recognised in Australia. The work undertaken will be paid as follows: 1. CONTROLMATIC will issue monthly invoices for reimbursement of telephone expenses, trips to TestSafe laboratory and anything else documented and strictly related to their technical work on behalf of CORTEM. Expenses not provided for under the previous paragraph will have to be agreed upon in advance with CORTEM. It is obvious that all expenses authorised and undertaken on CORTEM’s behalf (purchase of materials, custom clearance of samples, etc) will be reimbursed immediately. All requests for reimbursement/compensation provided for under 1 will have to reach us monthly in one invoice only; expenses to be refunded need to be accompanied by the appropriate documentation. CONTROLMATIC will need to send us complete monthly reports of their activities, detailing at the very least the state of the certification activities in relation to the planned objectives. This Letter of Appointment remains valid until the certification procedure will be completed.
It will be noted that, unlike the provision which the letter of April 2002 made with respect to
the period down to August 2002, this letter of September 2003 did not provide for a monthly
allowance. As a matter of contract as between Mr Venuti and Cortem, therefore, the former
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was entitled only to be reimbursed for the expenses which he had incurred in securing
certification of Cortem’s products in Australia. He was not entitled to remuneration for his
time.
18 In 2004, Mr Venuti caused the name “Cortem Australia” to be registered under the
Business Names Acts 2002 (NSW). He was himself named as the proprietor. A certificate of
registration of business name issued on 4 November 2004. Mr Venuti did not inform Cortem
of this development.
19 At some time during the period with which this litigation is concerned, the “AUS Ex”
scheme of certification was replaced by a new scheme, known as the “IEC Ex” scheme. It is
unclear when this change occurred, but it required Mr Venuti to make further applications for
certification, notwithstanding that the products in question were then certified under the
“AUS Ex” scheme. He made four such applications on 17 November 2005. Each proceeded
to certification. Those four applications, and the dates and details of the TestSafe certificates
and reports, were as follows:
Purchase Order No.
IEC Ex Scheme Certification – Description of Equipment
Outcome
2005.11.24 CCFE/EJB Series of Enclosures
Certificate of Conformity IEC Ex TSA 06.0011 Issued by TestSafe on 14 August 2006
2005.11.24 CCA/GUB Series of Enclosures
Certificate of Conformity IEC Ex TSA 06.0012 issued by TestSafe on 30 October 2006
2006.11.24 CSC, EFDC, EFD, EFSCO, EMHA Series of Control Stations
Certificate of Conformity IEC Ex TSA 06.0009 issued by TestSafe on 13 December 2006
2005.24.11 M-O Series of Operators Certificate of Conformity IEC Ex TSA 06.0015U issued by TestSafe on 11 August 2006
20 Despite the difficulties which Cortem, and Mr Venuti, apparently had in obtaining
TestSafe certification for at least some of their products, it seems that Cortem’s business in
Australia gradually came to prosper. By reference to a €/$A exchange rate of 1.7145,
Mr Venuti placed orders for Cortem products to the following values:
2001 $9,402.32
2002 $5,549.84
2003 $58,942.79
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2004 $296,548.47
2005 $380,039.50
2006 $234,836.77
2007 $105,472.90
According to Mr Nigro, from about 2004, the business collaboration between Cortem and
Mr Venuti “started to be profitable”. However, as will be apparent from the table set out
above, from 2006 the sales of Cortem products to Mr Venuti commenced to decline. Indeed,
it seems that the last major order for junction boxes placed by Mr Venuti was that for which
Cortem rendered an invoice on 21 December 2006. This decline in orders caused Cortem to
review its relationship with Mr Venuti, and ultimately to terminate that relationship in
December 2007. Before reaching that point, however, I should explain how the reduction in
orders came about.
21 On 22 February 2007, Mr Venuti caused Controlmatic Pty Ltd to be registered as a
company in New South Wales. On 30 March 2007, the business name “Controlmatic” was
transferred from Mr Venuti to Controlmatic Pty Ltd. On 1 April 2007, Controlmatic Pty Ltd
took over the business formerly conducted by Mr Venuti as a sole trader.
22 More or less contemporaneously with the transfer of his business to Controlmatic
Pty Ltd, Mr Venuti made arrangements (in the name of Controlmatic Pty Ltd) to have
junction boxes cast in Australia by a company called Central Foundry Pty Ltd. At least a
substantial part of the products supplied to Controlmatic Pty Ltd by Central Foundry Pty Ltd
consisted of enclosures in accordance with the plans and specifications upon which IEC Ex
certification had been obtained by Cortem for its CCFE and CCA series. Between 3 April
2007 and the end of that year, Central Foundry invoiced Controlmatic Pty Ltd in the total
sum of $370,093.46. Not all of this related to the supply of CCFE and CCA enclosures, but a
very substantial part of it did.
23 Having received these enclosures from Central Foundry Pty Ltd, Mr Venuti modified
them in various ways, and added the control buttons to them, so as to produce an effectively
identical final product to the Cortem ones in which he had previously dealt. He placed
identification plates on these products, which set out the technical information required under
the IEC Ex certification, which displayed the words “Cortem Australia”, followed by the
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phone number of Controlmatic Pty Ltd, and which were headed with the word “Cortem”,
written in the same font and style as that used by Cortem. Controlmatic Pty Ltd then sold
these enclosures into the market.
24 The largest customer of Controlmatic Pty Ltd (and previously the largest end-user of
Cortem products through Mr Venuti’s distribution) was a Melbourne company called
Harbour and Marine Engineering Pty Ltd (“Harbour and Marine”). Harbour and Marine
design and manufacture on-shore and off-shore docking and mooring systems, with a major
focus on the oil and natural gas industry. It is the Australian market leader in this area. It
commenced using Cortem junction boxes and command and signalling enclosures in about
2001 or 2002. In about 2004, Harbour and Marine was obliged to purchase all its Cortem
products through Mr Venuti, and subsequently Controlmatic Pty Ltd. The process
development manager for Harbour and Marine, Ryan Abbott, said that his company
attempted to prevail upon Cortem to supply its product directly, but was told that it had to
obtain the product through Cortem’s Australian distributor.
25 So far as the evidence indicates, at least until 25 May 2007, Mr Venuti was rendering
invoices to Harbour and Marine which were headed with the name of Controlmatic Pty Ltd
but were also headed with Cortem’s logo and its promotional line “Explosion Proof Electrical
Equipment”. On 7 June 2007 and thereafter, these invoices no longer showed the Cortem
logo, in place of which was the following: “CONTROLMATIC – Explosion Proof –
Electrical Equipment for Hazardous Areas and Corrosive Environments”. It may be inferred
from the evidence that the first products supplied by Controlmatic Pty Ltd to Harbour and
Marine which were based on an enclosure made by Central Foundry Pty Ltd were those
ordered by Harbour and Marine on 2 April 2007. Thenceforth, Controlmatic Pty Ltd
invoiced Harbour and Marine Pty Ltd a total of $478,933.
26 Another significant purchaser of Cortem junction boxes from Mr Venuti, and later
from Controlmatic Pty Ltd, was Stolway Holdings Pty Ltd (“Stolway”) a manufacturer of air-
conditioning units for the oil, gas and petrochemical industries, in situations where the units
would be used in areas where explosive gasses may be present. It was common for Stolway
to include junction boxes in its air-conditioning units. It seems that these purchases dated
from 2004, but the only documentary records in evidence date from late 2007. In this case
the Stolway purchase orders, as well as the Controlmatic Pty Ltd invoices, are in evidence.
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In every instance, the purchase order specified a “Cortem” product. What was supplied, of
course, were enclosures that Controlmatic Pty Ltd had caused to be cast in Australia.
27 Had these facts been known to Cortem, it would not have been surprising to its
executives in Italy that Mr Venuti’s orders for products were dwindling. However, no-one at
Cortem knew that Mr Venuti had commenced to trade in locally-made enclosures, in place of
those obtained from Cortem. But it was known that sales were dwindling and, after
reviewing the position, on 21 December 2007 Mr Nigro wrote the following letter to
Mr Venuti:
We refer to the agency agreement between Cortem Spa and Controlmatic, which was signed on 04.09.2003. In view of the provisions of art. 5 and according to art. 19 of the said agreement, we signify our intention to cancel our agreement forthwith, due to the non-achievement of minimum sales targets as per Attachment 6. Furthermore, during the life or our agreement, Cortem Spa has never received any order from Australian clients obtained through the offices of Controlmatic. We are available to discuss a business relationship more appropriate to the type and volume of business generated by you for Cortem Spa. You are kindly requested to sign a copy of this letter and to return it to us in receipt and acceptance.
Mr Venuti acknowledged receipt of Mr Nigro’s letter by email, without further comment.
28 In late January 2008, Mr Nigro came to Sydney with a view to discussing with
Mr Venuti the reasons for the decrease in sales of Cortem products. Mr Venuti showed him
the factory of Controlmatic Pty Ltd. It was then that Mr Nigro realised, from the plant and
equipment in the factory and from admissions made, seemingly without any reserve, by
Mr Venuti, that Controlmatic Pty Ltd was manufacturing junction boxes of the kind which
Mr Venuti had previously obtained from Cortem. During that visit, Mr Nigro said nothing
which would have alerted Mr Venuti to the fact that he (Mr Nigro) thought that Mr Venuti’s
conduct was irregular or unacceptable.
29 While still in Australia at the end of January 2008, Mr Nigro met with Edward
Mitchell, a director of GT Jones (Vic) Pty Ltd, who had recently visited Cortem in Milan
with a view to discussing whether his company might become a distributor of Cortem
products in Victoria. Mr Nigro informed Mr Mitchell of his suspicion that Controlmatic Pty
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Ltd was copying Cortem products. The two men discussed the means by which evidence of
this copying might be obtained. Mr Nigro asked Mr Mitchell to purchase a Cortem junction
box from Controlmatic Pty Ltd for this purpose. In early February 2008, Mr Mitchell asked a
business colleague of his, Mr Maurie Evans of Flametron Equipment, to purchase a Cortem
junction box from Controlmatic Pty Ltd. About a fortnight later, Flametron Equipment
delivered a junction box, purchased from Controlmatic Pty Ltd, to Mr Mitchell. That
junction box was duly delivered to Cortem, and ultimately led to the sending of a letter of
demand from Cortem’s solicitors to the respondents on 21 April 2008. On the following day,
22 April 2008, Mr Venuti signed an application to cancel the registration of the business
name “Cortem Australia”.
30 In about mid May 2008, it came to the attention of Colin Bailey, operations manager
of Stolway, that Controlmatic Pty Ltd might be manufacturing its own product, rather than
importing products from Cortem. Mr Bailey telephoned Mr Venuti, and in the course of the
conversation which followed, Mr Venuti said that Cortem and Controlmatic Pty Ltd were no
longer doing business. He said that he had arranged a lot of certification work for Cortem,
and that it had not paid him. He said that Controlmatic Pty Ltd was now producing its own
product, which was going through certification with TestSafe. At the time, Controlmatic Pty
Ltd was due to deliver to Stolway a Cortem junction box due on back order. When asked by
Mr Bailey where this junction was manufactured, Mr Venuti said that it was manufactured in
Australia.
31 On 23 May 2008, Mr Bailey and Stolway’s managing director, Michael Briggs, met
with Mr Venuti. Mr Venuti brought with him the junction box which was due on back order.
It had two metal badges affixed to it, one referring to “Cortem Australia” and the other
referring to “Cortem SpA”. Mr Briggs asked Mr Venuti whether the junction box had been
cast in Australia, and was given an affirmative answer. Mr Briggs asked whether Mr Venuti
had authority to manufacture Cortem junction boxes in Australia, and Mr Venuti said that he
did, but was unable to comply with Mr Briggs’ next request, which was to provide a copy of
that authority. Mr Venuti said that he had had a dispute with Cortem, and that they would not
support him. He added: “I have authority but we are in dispute”. Mr Briggs asked Mr Venuti
for a list of all junction boxes manufactured by him in Australia.
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32 On 27 May 2008, Controlmatic Pty Ltd sent to Mr Bailey, by email, five documents
each headed “Declaration of Conformity”. The documents were signed by Mr Venuti as
director. In the documents, Controlmatic Pty Ltd declared that the equipment referred to in
them was manufactured, tested and inspected according to the requirements of IEC Ex
certificate No. TSA 06.0011, and certain standards which were referred to. That was, of
course, a certificate issued by TestSafe to Cortem on 14 August 2006 (and for which Cortem
had paid). The declarations of conformity related to junction boxes (or to products based on
junction boxes) cast in Australia at the direction of Controlmatic Pty Ltd. These products had
been supplied to Stolway by Controlmatic Pty Ltd, and the declarations of conformity had, it
seems, the purpose of satisfying Messrs Bailey and Briggs that the products were
manufactured in accordance with Australian standards.
33 In his affidavit sworn on 10 June 2008, Mr Bailey expressed the opinion, on which he
was not challenged, that had his attention not been drawn to the possibility that
Controlmatic Pty Ltd was making junction boxes in Australia, Stolway would have been
unaware that the junction boxes which it purchased from Controlmatic Pty Ltd were not
authentic Cortem ones. He so opined because, as he said in his affidavit, “there were
minimal differences to the eye between the authentic Cortem junction boxes we received in
2004 from Mr Venuti and those manufactured by Mr Venuti/Controlmatic”.
34 The major Cortem product purchased by Harbour and Marine were the command and
signalling enclosures and junction boxes which carried the Cortem code CCA and CCFE.
Cortem was one of Harbour and Marine’s top ten suppliers, by dollar value. Since the events
which have become controversial in this proceeding, Harbour and Marine have obtained
Cortem products through Cortem’s new Australian distributor, GT Jones (Vic) Pty Ltd.
According to Mr Abbott, Harbour and Marine were always happy with Cortem products “and
we continue to use Cortem products as an integral component of the quality integrated
solutions we provide our customers”.
35 As noted earlier, the proceeding was commenced on 10 June 2008. On 28 July 2008,
the respondents filed their Defence and Cross-claim. In para 4 thereof, it was alleged that
Mr Venuti had performed services and incurred costs and expenses necessary to obtain
TestSafe certification of Cortem products. Particularising this allegation, the respondents
said that the certification work for Cortem took most of Mr Venuti’s time, with a minimum of
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three full days per week. Mr Venuti’s claim for unpaid services, costs incurred and expenses
was said to amount to $354,940 plus GST.
36 Cortem sought further and better particulars of the respondents’ Defence and Cross-
claim in a number of respects. It sought particulars as to how the sum of $354,940 was
calculated and made up. In a letter to Cortem’s solicitors on 11 September 2008, the
respondents’ solicitors answered this request for particulars by attaching copies of Mr
Venuti’s “tax invoices detailing the services rendered by him and how the amounts claimed
are calculated”. Attached to this letter were 21 invoices, consecutively numbered, all dated
21 February 2007. Cortem challenged the authenticity of these invoices – a matter with
which I shall have to deal – but first it is necessary to explain how the invoices related to
TestSafe certification of Cortem products. Each invoice was said to be based on the work
done, and the expenses incurred, by Mr Venuti in prosecuting Cortem’s application for
certification of a particular product, or series of products. The first eight invoices (Nos
7880-7887) related to the eight products, or series, referred to in paras 10 and 12 above
(although not respectively). The next nine invoices (Nos 7888-7896) related to certain
products with respect to which applications for TestSafe certification were withdrawn on
9 November 2006. The remaining four invoices (Nos 7897-7900) related to the four
products, or series, referred to in para 19 above.
37 At this point I should say something further about the nine invoices in the second
group mentioned in the previous paragraph, since, together, they give rise to $139,408.50 of
the total claim for remuneration of $354,940 pressed by Mr Venuti. The evidence supporting
these invoices is patchy, to say the least. Mr Venuti made no attempt to guide me through
this evidence, but, so far as I can make out, the position is as follows:
(a) In relation to two of the invoices (Nos 7888 and 7889), there are copy applications for
certification, and copy purchase orders for TestSafe to conduct testing, in evidence.
The applications are dated 7 August 2002 and the purchase orders are dated
15 January 2004 and 25 February 2004, respectively.
(b) In relation to four of the invoices (Nos 7891-7894), there are copy purchase orders –
all dated 20 May 2005 – in evidence. There are no copy applications for certification.
Two of those invoices related to the same series of products, but referred to different
TestSafe file numbers, a circumstance which was not explained.
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(c) In relation to one invoice (No 7896), there was a copy application – dated
8 September 2006 – in evidence, but there was no purchase order.
(d) In relation to one invoice (No 7895), there was neither application nor purchase order.
(e) The final invoice (No 7890) was supported by no other evidence.
38 Turning next to the timing and authenticity of the 21 invoices, evidence was given on
behalf of Cortem – which Mr Venuti, after initially dissembling on the subject, ultimately
accepted – that these invoices had been sent to Cortem in Italy neither in February 2007 nor
at any time prior to, or by any means other than that of, the respondents’ solicitors’ letter of
11 September 2008. It was put to Mr Venuti that these invoices had been prepared only in
September 2008, for the purpose of responding to Cortem’s request for further and better
particulars. He denied that, maintaining that they had been created by him on 21 February
2007, the last day before Controlmatic Pty Ltd was incorporated.
39 I do not accept Mr Venuti’s evidence on this subject. Prior to 21 February 2007, the
last invoice sent by Mr Venuti to Cortem was dated 11 December 2003. Mr Venuti asks the
court to accept that, having expended time and resources on obtaining certification for
Cortem products, and having made no attempt, over more than three years, to recover any
remuneration or reimbursement from Cortem, he prepared 21 invoices on one day, purporting
to represent the totality of his claims with respect to that period. Having done so, and being
aware that his claims amounted to $354,940, he took no step to recover this sum, nor even to
claim it, until September 2008. If Mr Venuti did believe that he had a legitimate claim
against Cortem in the amount referred to, and if he had made the effort to prepare these
invoices, I consider it highly improbable that he would not, more or less forthwith, have sent
them to Cortem in Italy.
40 There are also indications on the invoices themselves which would make one
sceptical, to say the least, about Mr Venuti’s claim that he raised them in February 2007. On
19 February 2007, Mr Venuti raised an invoice for a sale to Harbour and Marine. That was
invoice number 10768. The 21 invoices addressed to Cortem, and dated 21 February 2007,
were numbered 7880-7900. When I suggested to Mr Venuti that this invoice numbering was
not consistent with the invoice which he had addressed to Harbour and Marine two days
previously, he said that the invoices to Cortem related to “a job opened several years before”,
and that gave rise to a job number which was lower than the one used in the case of Harbour
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and Marine. When I asked Mr Venuti why that would throw up different invoice numbers, he
said:
Because they – this activity – see, this was an older – this number was signed when I received the order from Harbour Marine, which was maybe early that year. This number was – for me it was a job that was started three years before. There was a point in time when I decided, okay, I’d better put all these activities in proper jobs and I created the jobs.
41 I then referred Mr Venuti to an invoice which was addressed to Cortem in November
2002, number 10287. This appeared to make some kind of sense apropos the Harbour and
Marine invoice (19 February 2007) with the number 10768. But it made little sense that an
invoice raised in February 2007, for work done in the period July-November 2003, would
carry the number 7880. Mr Venuti’s explanation was as follows:
[A]t that time I used to classify the jobs and the number based on what – the type of activity. Say if, for example, the jobs that were related to, say, explosion proof products, started with one or 10, which later became a 17. The jobs related to – had some other products, they started with three – 30,000 – which does not mean that I had 20,000 invoices issued in between, you know. Simply because I started with three, I put in a different box. I had other products that – for which I started with eight, or with seven.
When asked how this related to invoice numbers, Mr Venuti said:
Because the – basically the first two digits, 10, are simply for the classification that I gave to the product – to the job. So when I have a – say that job of Cortem certification was basically job 788. And then I have a sub jobs and sub folders, if I may say so, no. With number one to three – zero, one to three and so on.
At my prompting, Mr Venuti accepted that jobs relating to Cortem started with the numbers
“78”. When I then alerted Mr Venuti to the fact that invoice number 10287, dated
4 November 2002, was addressed to Cortem, and did not start with the numbers “78”, he
said: “At that time I did not operate that way”.
42 A number of invoices addressed to Harbour and Marine in February 2007 – including
invoices dated both before and after 21 February 2007 – included a box headed “payment
details” in which the addressee might indicate whether the invoice was being paid by bank
transfer, by cheque or by credit card, and if the latter, might insert the relevant name, number
and expiry date. When I drew Mr Venuti’s attention to the circumstance that the invoices
addressed to Cortem and dated 21 February 2007 did not contain this “payment details” box,
- 19 -
he said that it had been a feature of the form which came with the proprietary software which
he used, and that he had later deleted it (because, as he said, he did not have credit card
facilities). When it was pointed out that the invoices to Harbour and Marine which did
contain the payment details box straddled the date 21 February 2007, Mr Venuti said that, in
the case of the Harbour and Marine invoices, he had a practice of retrieving old invoices from
his system, and entering the new details. Thus the Harbour and Marine invoices, although
bearing dates in February 2007, had the appearance of invoices which had been used at some
previous time, and included the payment details box. He did not, apparently, follow this
practice when he raised the 21 invoices addressed to Cortem (since the previous invoice to
Cortem dated 11 December 2003, contained the payment details box).
43 Mr Venuti’s evidence as to the timing of the creation of these 21 invoices was most
unsatisfactory. He originally said that they had been provided to Cortem in “2007 or 2008”,
and his eventual acceptance that they had been provided only by way of further and better
particulars on 11 September 2008 was extracted from him only as the result of persistent
cross-examination by counsel for Cortem. Having originally referred to the provision of
these invoices in broad and approximate terms, as though the actual date were of no particular
moment, Mr Venuti did his best to avoid confronting the reality of the matter. He was, in my
estimation, fully alive to the significance of the timing of the provision of the invoices to
Cortem, and initially made every endeavour to ensure that the true position would not be
revealed to the court.
44 The way in which Mr Venuti dealt with the anomalies to which I have referred in
paras 40-42 above was also most unconvincing. Both in the content of his evidence and in
the manner of its giving, I had the clear impression that Mr Venuti was prepared to devise
any benign procedural explanation for the improbable circumstances referred to in those
paragraphs. I do not accept those explanations in the slightest. I consider it very strongly
probable, and find, that the 21 invoices with which I am now dealing were first raised by
Mr Venuti in or about September 2008. He back-dated them to give the false appearance that
they had been raised on 21 February 2007.
CORTEM’S CLAIMS
45 The starting point for a consideration of Cortem’s claims against Mr Venuti must be
that, for the whole of the period during which Australian-made junction boxes were being
- 20 -
sold as Cortem ones, it was Controlmatic Pty Ltd, rather than Mr Venuti himself, that was the
relevant trading entity. Although Mr Venuti did not have the benefit of legal representation, I
was left in no doubt but that his position was that, had there been any actionable conduct at
all, it was Controlmatic Pty Ltd, rather than himself, which was the appropriate respondent.
Although Controlmatic Pty Ltd is itself no longer part of the proceeding, for reasons which
will follow, it is necessary to consider first whether that company engaged in any conduct
that would be actionable at the suit of Cortem.
46 It was submitted on behalf of Cortem that Controlmatic Pty Ltd contravened s 52, and
paras (a) and (c) of s 53, of the Trade Practices Act, when it offered for sale, and sold,
junction boxes to Harbour and Marine and to Stolway which were held out to be Cortem
products, and to carry the TestSafe certification issued to Cortem, when neither was the case.
I would have no hesitation in concluding that this conduct on the part of Controlmatic Pty Ltd
was in contravention of s 52. Harbour and Marine and Stolway were both established
customers of Mr Venuti who had, for some time previously, purchased Cortem products from
him. These products had received TestSafe certification as products manufactured by
Cortem. Without notifying Harbour and Marine or Stolway of the change, Controlmatic
Pty Ltd substituted products based upon junction boxes which Mr Venuti had arranged to be
cast in Australia. It endorsed those junction boxes with an identification plate bearing the
name of Cortem, and the details of certification which had been granted to Cortem. It sold
these products to Harbour and Marine and to Stolway without advising them that they were
not genuine Cortem products and that they were not covered by the TestSafe certification
granted in respect of Cortem products. On any view, the conduct of Controlmatic Pty Ltd to
which I have referred was misleading and deceptive. It was in contravention of s 52 of the
Trade Practices Act.
47 I also consider that the sale of these products to Harbour and Marine and to Stolway
by reference to TestSafe certificates granted to Cortem was to represent that the products had
an approval which they did not have, contrary to s 53(c) of the Trade Practices Act.
Mr Venuti sought to argue that the certificates had been obtained by him, and that the
products sold by Controlmatic Pty Ltd were manufactured in accordance with the
specifications and drawings by reference to which the certificates had been granted. It
followed, according to Mr Venuti, that it could not be said that those products did not have
the approval of TestSafe. This argument was, in my view, disingenuous. The TestSafe
- 21 -
certificates were in the name of Cortem. In applying for them, Mr Venuti had been acting on
behalf of Cortem. They provided no basis for the suggestion that junction boxes not made by
or under the authority of Cortem had the approval of TestSafe.
48 I am not persuaded that the sale of these products by Controlmatic Pty Ltd under the
Cortem name amounted to a false representation that they were of a particular standard,
quality, value, grade or composition contrary to s 53(a) of the Trade Practices Act. To the
extent that a representation about such matters was implied, it was not established that it was
false. It was not established that the junction boxes cast in Australia were of a lesser
standard, quality, value, grade or composition than the equivalent Cortem products, or than
was implied by the citation of the TestSafe certification.
49 On the other hand, I do consider that the identification plate on the junction boxes
sold by Controlmatic Pty Ltd falsely represented that those products were of a particular
model, contrary to s 53(a). The plate on the box in evidence set the model designation as
“CCFE-1”. This was, in my view, a false suggestion that the box was within the Cortem
CCFE range for which certification had been granted by TestSafe. I note, from the
Controlmatic Pty Ltd invoices in evidence, that all or substantially all of the junction boxes
sold to Harbour and Marine and to Stolway were said to be in the CCFE series. This was a
false suggestion.
50 Cortem also relied upon s 53(g) of the Trade Practices Act, arguing that, by the sale of
junction boxes under the Cortem name and logo, Controlmatic Pty Ltd made a false
representation that the goods in question were covered by the Cortem warranty. I do not so
view the matter. Although Cortem products were covered by a warranty, and although
Harbour and Marine and Stolway may well have assumed that the products they purchased
were Cortem ones and would in the normal course be covered by a standard Cortem
warranty, the fact is that Controlmatic Pty Ltd provided its own warranty and, save for
describing the products as Cortem ones, said and did nothing to represent to its customers that
the Cortem warranty was being given.
51 I take the view, therefore, that Controlmatic Pty Ltd contravened s 52, and paras (a)
(the “model” aspect) and (c) of s 53, of the Trade Practices Act. That brings me to s 75B of
that Act. Under that provision, a reference in Part VI of the Act to a person involved in a
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contravention of a provision of Part V thereof (ie including ss 52 and 53) is to be read as a
reference to a person who aided, abetted, counselled or procured the contravention, to a
person who induced the contravention, and to a person who was in any way, directly or
indirectly, knowingly concerned in, or party to, the contravention. Although I accept that a
person will not have the kind of involvement referred to in s 75B merely by being an officer
of a contravening company, in the present case there can be no question but that Mr Venuti
had the necessary involvement in the relevant conduct of Controlmatic Pty Ltd to attract the
operation of s 75B. He was the only shareholder, the only director and the person completely
in charge of Controlmatic Pty Ltd. Further, with respect to the events of which Cortem
complains, Mr Venuti was totally responsible for those events: indeed, it is no exaggeration
to say that, in the present case, Controlmatic Pty Ltd was no more than the corporate vehicle
through which Mr Venuti traded. Mr Venuti was an intentional participant in the conduct of
Controlmatic Pty Ltd which I have held to contravene ss 52 and 53, his intent being based
upon knowledge of the essential elements of the contravention: Yorke v Lucas (1985)
158 CLR 661, 670. I consider that the requirements of s 75B are amply satisfied in
Mr Venuti’s case.
52 Cortem based its claim for damages under s 82 of the Trade Practices Act upon the
proposition that Harbour and Marine and Stolway both had an established history of
purchasing Cortem products and, when they bought from Controlmatic Pty Ltd, they thought
they were buying from Cortem itself. Absent the misleading representations in contravention
of s 52, or the false representations in contravention of s 53, it may readily be inferred that
those customers would have continued to buy from Cortem, rather than taking the alternative
product offered by Controlmatic Pty Ltd, presumptively labelled in non-misleading terms.
Every sale of a junction box by Controlmatic Pty Ltd was, therefore, a sale which would,
absent these contraventions, have gone to Cortem. These are very unremarkable
propositions, and I accept them. Realistically, Mr Venuti did not invite me to find that, had
the junction boxes not been labelled and sold as Cortem ones, Controlmatic Pty Ltd would
most probably have sold them to Harbour and Marine and to Stolway in any event. I find that
it would not have.
53 Mr Nigro gave evidence, on which he was not challenged, that the profit element of
the sales which Cortem lost in the manner described above was $222,558.18. I shall award
damages against Mr Venuti in that sum.
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54 In the alternative, Cortem relied upon provisions of the Fair Trading Act the
equivalent of those in the Trade Practices Act with which I have dealt above. Given the
conclusions which I have reached under the Trade Practices Act, I consider there to be no
need to refer further to the Fair Trading Act. But I shall make two observations in relation to
the possible application of that Act to the circumstances of the case. First, resort to that Act
would not simplify Cortem’s cause of action against Mr Venuti, as distinct from Controlmatic
Pty Ltd. It is true that Mr Venuti was not a corporation within the meaning of ss 52 and 53 of
the Trade Practices Act, but the circumstance that he was not, at the relevant time, the trading
entity which engaged in misleading or deceptive conduct would remain a problem for Cortem
under the Fair Trading Act no less than under the Trade Practices Act. Secondly, I was not
addressed on the question whether the conduct of Controlmatic Pty Ltd (a NSW company) in
the sales it made to Stolway (also a NSW company) might be regulated by the provisions of
the Fair Trading Act (a Victorian Statute). Cortem placed no reliance on the corresponding
provisions of NSW legislation.
55 With respect to Cortem’s claim in passing off, counsel for Cortem accepted that a
claim in damages would have lain only against Controlmatic Pty Ltd. Counsel did submit
that the circumstances were such as would call for Mr Venuti himself to be restrained by
permanent injunction, notwithstanding that damages were not available as against him. I
shall deal with that aspect below, but, so far as damages are concerned, I shall dismiss
Cortem’s claim in passing off. I would add that this claim and the corresponding claims
under the Trade Practices Act were advanced as true alternatives: Cortem claimed
compensation for the loss suffered as a result of the representations made by Controlmatic
Pty Ltd that its products were Cortem’s, and it will be awarded that compensation under the
Trade Practices Act. There would be no need for an award of damages for passing off.
56 Cortem sought the making of declarations to record the terms on which the court
determined its case against Mr Venuti. I do not, however, consider it appropriate to make
declarations as a matter of course merely for such a purpose. This is not a case in which a
declaration is necessary to clarify the legal basis of the ongoing relations of the parties, or to
give content to the judicial determination of a dispute which would not otherwise be closed
off by order. Cortem has succeeded in its case for damages, the basis of which will be
sufficiently clear from my reasons above. There is no call for declarations to be made in the
circumstances of the present case.
- 24 -
57 Cortem also sought that Mr Venuti be restrained by permanent injunction from
continuing to engage in conduct of the kind which has provided the foundation of Cortem’s
success in this proceeding. Clearly I could not restrain Mr Venuti from having any further
involvement in contraventions of ss 52 and 53 of the Trade Practices Act by Controlmatic Pty
Ltd, as that company no longer exists. However, I consider that the legal and factual
foundations have been laid for the grant of a permanent injunction restraining Mr Venuti
from the kind of involvement as is contemplated by s 80(1) of the Trade Practices Act, which
relevantly reflects the terms of s 75B, in relation to any trading corporation. It is true that, in
one sense, the events of this case are wholly in the past, but Mr Venuti has asserted his right
(or the right of his company) to market products by reference to TestSafe certificates issued
to Cortem. Particularly given the connections in the relevant industry which he may be
presumed to have built up while legitimately Cortem’s Australian distributor, and his deep
involvement in amending the specifications for the products that were certified by TestSafe, I
could not have a high degree of confidence that he would treat the events with which this
case has been concerned, and which give rise prima facie to an entitlement to injunctive relief
of some order, as wholly in the past.
58 Whether an injunction should go against Mr Venuti personally (that is, to restrain him
in relation to activities in which he might engage as a sole trader) is a more difficult question.
Sections 52 and 53 (and therefore s 80(1) of the Trade Practices Act) would not provide the
basis for such a restraint. Cortem placed no reliance upon the extended operation of that Act
by virtue of the provisions of s 6 thereof. And, since the repeal of s 4(1) of the Jurisdiction of
Courts (Cross-Vesting Act) 1987 (Vic) in 2000 (no doubt in consequence of Re Wakim (1999)
198 CLR 511) it would seem that the court cannot exercise the jurisdiction given to the
Supreme Court of Victoria under s 149(1) of the Fair Trading Act. As it happens, that was
not a jurisdiction which Cortem sought to invoke in the present case. Rather, it relied upon
its cause of action in passing off as the basis for the granting of a permanent injunction that
would restrain Mr Venuti directly.
59 It was submitted on behalf of Cortem that its passing off case as against Controlmatic
Pty Ltd was a strong and obvious one. I accept that submission: see Reckitt & Coleman
Properties Ltd v Borden Inc [1990] 1 WLR 491, 499; Conagra Inc v McCain Foods (Aust)
Pty Ltd (1992) 33 FCR 302, 308-309, 327, 355-356. In the present case, Cortem had an
established reputation in Australia with respect to its explosion-proof enclosures, which had
- 25 -
been built up during the time of Mr Venuti’s distributorship. The evidence relating to
Harbour and Marine and to Stolway makes that clear. Controlmatic Pty Ltd represented,
falsely, to both of those companies that its goods were those of Cortem. And, as explained
above, Cortem suffered damage as a result of that representation. However, as I have pointed
out elsewhere, this passing off was the doing of Controlmatic Pty Ltd, not Mr Venuti.
60 In the submissions made on behalf of Cortem, it was a matter of presumption, rather
than argument, that the facts referred to above would sustain a claim for a permanent
injunction restraining Mr Venuti directly. I do not regard that proposition as self-evident. I
was not addressed upon the difficult, and unresolved, question of the liability of an
individual, as joint tortfeasor, for the wrongful conduct of the company of which he or she
was a director: see Keller v LED Technologies Pty Ltd [2010] FCAFC 55, where the relevant
authorities are collected in the judgments of Besanko J and myself. Our emphasis in those
judgments, was on statutory causes of action for infringement of patent or design, for
example, rather than on the common law torts. However, the principles which we discussed
seem to be of universal application and, while they might justify the conclusion that
Mr Venuti was a joint tortfeasor on the facts of the present case, the proposition was not
developed in the arguments advanced on behalf of Cortem, in which circumstances I am not
disposed to enter upon the difficult questions involved in these reasons.
61 For the above reasons, I do not propose to restrain Mr Venuti other than by an order
under s 80(1) of the Trade Practices Act which relates to involvement in the conduct of a
trading corporation. It will be clear from what I have written above, however, that this
should not be viewed by Mr Venuti as a green light to engage, as a sole trader, in anything
like the conduct in which Controlmatic Pty Ltd engaged in relation to the name and
reputation of Cortem in 2007 and 2008. To the contrary: if any light is to be seen by
Mr Venuti in relation to conduct of that kind, it should be a red one. My decision not to
restrain Mr Venuti save by reference to the conduct of a trading corporation has been based
wholly on what I consider to be Cortem’s inability to persuade me that, on the facts as here
presented, Mr Venuti himself should be regarded as having engaged in passing off.
MR VENUTI’S CROSS-CLAIM
62 Mr Venuti raised a number of matters in his cross-claim, but only two of them were
persisted with at trial. First, he claims remuneration, or compensation, for the time spent by
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him obtaining, or attempting to obtain, TestSafe certification for Cortem products; and
secondly, he claims damages for the supply by Cortem of products which were not of
merchantable quality, not reasonably fit for their intended purpose, and otherwise defective in
respects to which I shall refer.
63 Dealing first with Mr Venuti’s claim for remuneration for his time, he says that
Cortem authorised him to act on its behalf to do everything that was necessary to obtain
TestSafe certification for its products (relying in this regard upon the memorandum to which
I have referred in para 8 above). He says that, over the period to November 2006, Cortem
requested him to assist it in obtaining the required certification, and that he did provide such
assistance. He says that he performed services and incurred costs and expenses which
precluded him from engaging in other employment and from developing his business in other
respects. He says that, as a result of his efforts, Cortem obtained certification of a number of
its products, and obtained additional benefits by way of product evaluation, testing, design
and development in relation to products for which certification was not achieved. He claims
that “Cortem has been enriched by the receipt of those [b]enefits which were gained at
Venuti’s cost and expense and it would be unjust in the circumstances to allow Cortem to
retain those benefits”. In the alternative, Mr Venuti claims a declaration that Cortem holds
those benefits on trust for him, and an order that Cortem account to him for the profits made
as a result of those benefits, or (at his election), an order that Cortem pay him the sum of
$354,940 (plus GST), being the reasonable value of the services provided by him, and the
costs and expenses incurred by him, and which is said to be “tantamount to the value of the
benefits conferred upon Cortem”.
64 In my view, this claim by Mr Venuti encounters both legal and factual difficulties.
However the claim be formulated, it would seem that the jurisprudential principle by
reference to which it must stand or fall is that referred to by Deane J in Pavey & Matthews
Pty Ltd v Paul (1987) 162 CLR 221, 255: “[T]he basis of the obligation to make payment for
an executed consideration given and received under an unenforceable contract should now be
accepted as lying in restitution or unjust enrichment.” Mr Venuti submitted that the
agreement made in Milan in September 2003 was invalid and of no effect, since Cortem had
obliged him to execute it by tactics which the court should regard as unconscionable. I shall
say something about that latter allegation in a moment, but the proposition that the agreement
was invalid encounters an insuperable difficulty at the outset: this was an Italian agreement
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which was governed by Italian law, the parties to which submitted to the jurisdiction of the
court of Gorizia. The agreement was never voided or set aside (in fact, there was neither
evidence nor suggestion that any step had been taken to that end). In the circumstances, I
have no choice but to treat the agreement as a valid one which subsisted at all times when
Mr Venuti was doing business with Cortem.
65 It is true that the agreement of September 2003 did not in terms deal with the issue of
how Mr Venuti would be compensated for the time spent securing certification of Cortem
products in Australia. However, the previous agreement had done so, in a limited way. As
noted in para 14 above, in September 2003 the parties were in dispute as to Mr Venuti’s
entitlement to a monthly allowance subsequent to September 2002. Cortem had made it clear
that it regarded no such allowance as payable under the original agreement. The absence of
any reference to compensation in the agreement of September 2003 makes it clear, in my
view, that the parties adverted to the question, and made a conscious choice not to provide for
compensation in the agreement.
66 Mr Venuti contended that the conduct of Cortem in requiring him to execute the
agreement of September 2003 was unconscionable, with the result that the agreement itself
could effectively be ignored. As I have noted above, such matters are not justiciable in an
Australian court. However, had they been, I would not have upheld Mr Venuti’s position.
Had he not wished to enter the agreement of September 2003, he need not have. He could, as
put to him by counsel for Cortem in the course of cross-examination, have walked away. He
did not walk away: indeed, there is no evidence of him having made any contemporaneous
complaint about the terms of the 2003 agreement. To the contrary: he traded with Cortem
under the agreement for a number of years, and took the benefit of being Cortem’s sole
Australian distributor during that time. That latter consideration is given a sharper focus in
the facts of the present case when it is realised that, during the period of Mr Venuti’s
distributorship, Stolway made an attempt to deal with Cortem directly, but was informed that
it would be necessary to deal through its Australian distributor. Cortem did not submit that
Mr Venuti was estopped from alleging that the 2003 agreement was invalid – and for that
reason I do not hold that he was – but it would be difficult neither to perceive in the facts of
the present case an assumption by Cortem, induced by Mr Venuti’s acceptance of benefits
under the agreement, that the agreement was valid, nor to conclude that it would, in the
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circumstances, be unconscionable for Mr Venuti to ignore such an assumption: see Waltons
Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, 404.
67 Turning to the factual difficulties confronted by this claim, the only evidence by
Mr Venuti as to the amount of work which he had expended in securing the certification of
Cortem products was that given in his affidavits sworn for the purposes of these proceedings
and in the 21 invoices which, as I have held above, were raised only in or about September
2008. In these places, Mr Venuti claimed to have spent stated periods of time in connection
with the certification of various products. He produced no time-keeping or similar records:
indeed, in his evidence he made it clear that he had never maintained any such records.
When challenged about this omission, Mr Venuti seemed to regard it as almost absurd that a
self-employed person should keep a record of the time that he or she had spent on a particular
job. According to Mr Venuti, the proof of the matter lay in the invoices themselves.
Whatever the legal or commercial legitimacy of such a position may be, however, in a case in
which invoices are raised contemporaneously with the carrying out of the work to which they
relate, this is not such a case. The 21 invoices are of no evidentiary value in establishing how
much time was expended by Mr Venuti in connection with the certification of Cortem
products; and neither are the affidavits which go little further than to provide Mr Venuti’s
oath as to the invoices. As to the expenses which Mr Venuti claims to have incurred in
connection with the process of certification, as noted in para 14 above, there is no suggestion
that his vouched claims for expenses were at any time rejected by Cortem. In the
circumstances, I am not satisfied that Mr Venuti has established the facts necessary to sustain
this aspect of his cross-claim.
68 The other aspect of Mr Venuti’s cross-claim which is still being pursued relates to
products supplied to him by Cortem between September 2003 and March 2007 which, it is
alleged, were not of merchantable quality, were not reasonably fit for their intended purpose,
were not in conformance with certifications for those products which had been obtained from
TestSafe, were not otherwise compliant with all applicable TestSafe requirements and
industry standards and rules and were “otherwise of defective design, materials and/or
workmanship”. Mr Venuti claims the sum of $166,274.38, which represents the amount paid
by him to Cortem for the purchase of products which remained in stock at the time when
Mr Venuti transferred his business to Controlmatic Pty Ltd.
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69 Cortem sought further and better particulars of Mr Venuti’s cross-claim in relevant
respects. It required the specification of each of the articles for which Mr Venuti had paid,
and which remained unsold because they were defective etc. It required Mr Venuti to specify
the quantities of each article that remained unsold, the “serious non-conformances” of each of
these articles, and the faults and defects in them. It required Mr Venuti to give particulars “of
each notification of [Cortem] by [Mr Venuti] of the defectiveness of these products”. It
required also particulars of how the sum of $166,274.38 had been calculated. In response to
that request for particulars, Mr Venuti supplied a spreadsheet headed “Cortem Stock”. It
identified products by Cortem’s catalogue number, it stated the numbers of each item held, it
stated the price paid by Mr Venuti for these items, and it indicated which of them were faulty
or non-conforming. The total of the prices paid by Mr Venuti for products which were faulty
or non-conforming was shown to be $166,274.38.
70 At trial, Cortem invited me to find that Mr Venuti had led no evidence in support of
his claim for the amount referred to. That was not entirely correct. In his affidavits sworn on
7 December 2009 and 26 February 2010, Mr Venuti led evidence which related to two classes
of product which he purchased from Cortem: the “SA” series of junction boxes and the
products in relation to which his applications for TestSafe certification were withdrawn on 9
November 2006: see paras 12 and 11 above, respectively. With respect to the SA junction
boxes, Mr Venuti gave evidence of the difficulties he encountered securing TestSafe
certification. The two aspects to which he drew particular attention were the thickness of one
part of the wall of the unit and the composition of the gasket used to seal the join where the
box was opened. Mr Venuti prepared new drawings and specifications, in which he increased
the wall thickness from 2.5 mm to 3 mm and substituted silicone gaskets for the original
neoprene ones. On the strength of these and other adjustments, TestSafe certified the SA
junction boxes on 9 November 2004. However, Mr Venuti said in his evidence that the
products which he subsequently received from Cortem “all had insufficient thickness and
neoprene gaskets”. He was not challenged on this evidence. He also said:
The SA.. junction boxes that I ordered, received from Cortem from 2003 to 2007, and I paid in full, were non-conforming and dangerous products for the reasons stated above. This supports my cross-claim against Cortem for defective and non-compliant products supplied for $ 166,274.38, as further expanded in sections 8, 9, 10, 11 of my Cross-Claim.
And:
For the evidence given in paragraphs 9 to 14, I also repeat my additional claim stated
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at paragraph 8 and 9 of my cross-claim for defective and non-compliant products supplied to me and paid in full, for the value of $ 166,274.38. I further claim compensation for the cost and damages that such unconscionable and irresponsible behaviour caused to me and loss of profit.
71 Subsequent to achieving TestSafe certification for the SA junction boxes in
November 2004, it seems that Mr Venuti purchased boxes in this series from Cortem.
Although Mr Venuti did not direct me down this path in his submissions, I have attempted to
correlate the SA junction boxes which were, in their original form, rejected by TestSafe with
the particulars of faulty goods supplied by Mr Venuti in response to Cortem’s request for
particulars. The result is as follows:
Product ID Quantity Sum paid by Mr Venuti
SA090907/P 5 $114.42
SA111108/P 5 $142.47
SA111108/SS 4 $548.80
SA141410/P 2 $66.97
SA141410/SS 16 $2,318.29
SA171108/SS 2 $310.02
SA301410/SS 3 $639.93
SA473018/SS 6 $2,094.16
SA623018/P 4 $764.10
SA623018/SS 7 $3,653.81
Total: $10,652.97
There are other junction boxes referred to in Mr Venuti’s particulars which appear to be in
the SA series, but the TestSafe failure reports mentioned by Mr Venuti in his affidavit do not
relate to them.
72 Mr Venuti gave no evidence to the effect that, because of non-compliance with the
specifications upon which certification was based, he sold none of those boxes into the
market. I think it highly unlikely that he did not sell them, by reference to that certification.
That is to say, I am not satisfied that the non-compliance with specification of these boxes
was the reason that some of them remained unsold when Controlmatic Pty Ltd took over the
business. Although this was not dealt with in terms in Mr Venuti’s evidence, I think it more
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likely that those unsold boxes simply happened to be the stock which Mr Venuti was holding
in the normal course at the relevant time.
73 The other group of Cortem products of which there is evidence of faults or defects is
that covered by the withdrawal of applications for certification done on 9 November 2006.
These products were the subject of Mr Venuti’s affidavit of 26 February 2010. He said that,
intending to promote the products concerned in Australia, and relying on (oral) assurances
from Cortem staff that the products were as good as the corresponding products of Cortem’s
main international competitor, he purchased, and paid for, substantial stocks thereof. He said
that certification “was expected to be achievable”. That expectation proved to be unduly
optimistic. These products did not proceed to certification.
74 To say that certification was not obtained – and even may not have been obtainable –
for these products is one thing. To say that they were faulty or defective in some way would,
however, be another thing altogether. Mr Venuti’s evidence on the latter subject was as
follows:
As in the other certification projects, I was required to prepare a large amount of documents to show conformity of those Cortem products to Standard. As Testsafe testing and investigation progressed, more and more non-conformances and product design faults became evident. The FSQC receptacles rated at 63 A overheated to above 160C after one hour of full-load test. The lighting products had the most serious issues, especially the EVF Lighting Fixtures and the Luminaries Series EXEL. The samples, which I had supplied from my stock previously purchased from Cortem and paid in full, failed each and every test. Photos in Annexure C pages … show evidence that the explosion-proof EVF were in fact not explosion-proof at all and could not possibly be. Even the glass tube, portrayed by Cortem as “tempered”, was not and could not possibly be tempered. The sealing of the parts failed the sealing test. The EXEL luminaire samples revealed similar issues of defective design and misrepresentation. The plastic cover was described in the certification documents that Massimo Zorzin of Cortem provided to me, as being made of Polycarbonate 943A (as stated by Mr Riccardo Gratton in the Technical Note at page 67). This material can withstand temperature of 151C, as shown in the Sabic specification at page 71. Test [sic] revealed that all the products in my possession, which I paid for, were instead made of acrylic and failed prematurely during the heat tests at 100C. Further lack of confidence was induced by the fact that Mr Zorzin of Cortem assured that CESI did successfully test the EXEL product, and that a Test Report could be provided to support that; but such Test Report was never made available. The only Test Report from CESI that I received shows that the EXEL product failed all tests and the testing was suspended. This Test Report is in Annexure “C” page …
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After four years of relentless work to try to achieve certification for the products listed in paragraph 4 above, the only possible outcome was to withdraw the applications with Testsafe. I did this in agreement with Mr Zorzin on 9 November 2006.
Mr Venuti was not challenged on this evidence.
75 The exhibit to Mr Venuti’s affidavit which set out his correspondence with, and the
various test results obtained by, TestSafe was 150 disorganised pages of photocopies. In his
submissions, Mr Venuti did not attempt to make sense of this, or to relate it to the paragraphs
of his affidavit which I have set out above. However, there is enough in the exhibit to make
good Mr Venuti’s claim that the lighting fixtures series EVF and the luminaries series EXEL
failed the tests which were required for certification. I could not find anything in the exhibit
which dealt with the FSQC receptacles, but, as I have said, Mr Venuti was not challenged on
the proposition that they overheated.
76 Given the generally disorganised state of Mr Venuti’s evidence on this subject, I am
not prepared to find that any of the other Cortem products presently under discussion was
faulty. Mr Venuti did not refer to them in his affidavit (ie other than as part of the class for
which the applications for certification were withdrawn). In the exhibit to which I have
referred, there is some evidence of “issues” being raised by TestSafe in relation to these
products, most of which appear to be concerned with the requirements of plans and
specifications, rather than by way of suggesting the existence of faults or defects. Neither in
the evidence nor in the submissions was there any examination of this distinction. In the
circumstances, the only products as to which I am prepared to make a finding of faults or
defects are those mentioned in the text of Mr Venuti’s affidavit.
77 As with the SA junction boxes, I have attempted to correlate these products (as
identified in Mr Venuti’s affidavit) with his particulars of faulty goods. The result is as
follows:
Product ID Quantity Sum paid by Mr Venuti
EVF-136EB 5 $1,102.50
EVF-158EB 8 $1,539.19
EVF-236EF7 1 $853.05
EVF-258EB 34 $8,993.90
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Product ID Quantity Sum paid by Mr Venuti
FSQC-33463 1 $286.65
Total: $12,775.29
Mr Venuti’s particulars referred also to 142 EXEL-21 and EXEL-22 units, but they were
apparently purchased by Controlmatic Pty Ltd, rather than himself, and make up no part of
his present claim.
78 In his submissions in court, Mr Venuti provided two separate legal bases for the
cross-claim, to the extent that it dealt with defective goods. The first was based upon
Cortem’s standard form of warranty which (as was contended by Mr Venuti and not gainsaid
by Cortem) applied to the sales in question. That warranty was part of the printed conditions
which, it seems, were attached to all sales by Cortem, and was in the following terms.
WARRANTY FOR DEFECTS AND GOOD FUNCTIONING Cortem Spa warrants that at the time of shipment the products manufactured by Cortem and sold hereunder (products, accessories, any sub-supplied items) will be free from defects in material and workmanship, and be [sic] conform to specification and to current rules and regulations. Cortem Spa warrants the good functioning of the supplied goods for a period of 12 months after delivery completion. If any defect within this warranty appears, Buyer shall notify Cortem Spa within 6 days upon discovery, unless otherwise agreed. In the event of justified claims relating to the quality, defects in material or workmanship of the goods delivered, Cortem Spa agrees to repair or furnish a replacement for, but not install, the non-compliant/defective goods at destination free of charge. No charges for installation and no additional costs will be accepted. Neither replacements nor returns will be accepted unless previously agreed and authorized by Cortem Spa. This warranty does not extend to any product manufactured by Cortem which has been subjected to inappropriate handling, inappropriate loading/unloading, misuse, neglect, accident, improper installation or use in violation of instructions furnished by Cortem of the goods delivered.
79 Cortem’s standard form of conditions included also the following:
COMPLAINTS Buyer shall submit all complaints, particularly those regarding the quality or quantity of the goods, to Cortem Spa in writing by registered mail without undue delay, in any event not later than 8 working days from discovery of such defects. Any goods return is subject to previous agreement and written acceptance by Cortem Spa, who will not anyway cover the transportation costs. GOVERNING LAWS Any dispute that may arise between Cortem Spa and the Buyer for the interpretation and execution of domestic purchase orders shall be governed in accordance with the laws of Italy. Buyer hereby consents and submits to the jurisdiction of the court of
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Gorizia for adjudication of any question of law or fact arising hereunder. Any dispute, controversy or claim arising from or relating to international purchase orders, or the breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the UNCITRAL Arbitration Rules as at present in force.
80 In responding to these aspects of Mr Venuti’s claim, Cortem made no reference to the
printed conditions on which Mr Venuti relied. Rather, it referred to the terms of the overall
contract of September 2003 which governed its relations with Mr Venuti generally. In
particular, it referred to Art 12 of that contract (to which I have referred in para 16 above). In
his affidavit sworn on 11 March 2010, Mr Nigro said:
Pursuant to the Letters of Technical Assistance if there were any problems with the Cortem products then Mr Venuti had to contact Cortem and our quality control division (Clause 12, CB p.292). Mr Venuti was required to contact our quality service section and they would then deal with the matter. Cortem takes very seriously the condition of its products. There are references in the Court Book and photographs of alleged Cortem products. I do not believe these are Cortem products because Cortem would not let these products leave its manufacturing warehouse. I believe that there may have been six or seven matters raised with our complaints section over the period of time Mr Venuti was acting as the distribution agent from April 2002 till [sic] December 2007 and these were each dealt with appropriately and responded to by Cortem in response to matters raised by Mr Venuti.
Although this was not made explicit in the evidence or in the parties’ cases, I rather think that
Mr Nigro’s evidence was concerned with the kind of complaints as are referred to in Art 12,
ie complaints from end users of Cortem products. There was no attempt by Cortem to deal
with Mr Venuti’s evidence as to the inability of Cortem’s products to achieve certification
under the Australian regulatory regime.
81 Neither did Cortem deal with so much of Mr Venuti’s case as relied upon the printed
conditions of sale. It was submitted that the terms of sales by Cortem to Mr Venuti were
governed by Italian law, but again this submission was based on Art 20 of the contract of
September 2003 (see para 16 above) rather than upon the “governing laws” provisions of the
printed conditions. As to the latter, it is quite clear that “international purchase orders” were
subject not to the laws of Italy but to the UNCITRAL arbitration rules, to the terms or
relevance of which I was taken by neither party.
82 In the rather unsatisfactory circumstances to which I have referred, I take the view
that Mr Venuti is entitled to rely on Cortem’s warranty on its printed conditions of sale. He
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is not precluded from doing so by the “governing laws” provisions of the conditions. That
does not mean that he must succeed on the merits, of course, and it is to that question that I
next turn.
83 I am not satisfied that, at the time they were delivered to Mr Venuti, the products in
Cortem’s SA, EVF or FSQC series contained “defects in material [or] workmanship” within
the terms of the warranty. Neither am I satisfied that such goods did not “conform to
specification”. The only evidence of faults or defects led by Mr Venuti was of these
products’ failure to cross the bar when tested by TestSafe. Those tests involved the
application of heat, pressure and other environmental stressors required for certification. The
products’ failure to pass them did not, in my view, imply the existence of defects in material
or workmanship, or non-conformity with Cortem’s own specifications.
84 The aspect of the warranty upon which Mr Venuti most strongly relied was that which
stated that the products would “conform … to current rules and regulations”. Here,
Mr Venuti’s case was a simple one: in the context in which the mercantile transactions
between himself and Cortem took place, the “current rules and regulations” were necessarily
Australian ones; the TestSafe tests demonstrated that the products in question did not comply;
therefore, there had been a breach of warranty. Regrettably, I was not assisted by any
submission on behalf of Cortem as to how Mr Venuti’s case might be answered in relevant
respects. It was not submitted, for example, that the warranty did not mean what it said, or
ought to be given a special construction in circumstances in which the purchaser was a
national distributor seeking, for the first time, to establish conformity with “current rules and
regulations”.
85 Cortem did submit (not specifically with respect to the warranty, but with sufficient
generality to extend to the circumstances of the warranty) that Mr Venuti had not notified
Cortem of the defects and faults upon which he now seeks to rely. I cannot accept that
submission. Mr Venuti gave evidence that, over the relevant period, he was constantly in
contact with the technical staff of Cortem about the difficulties which he was encountering
with the process of certification. None of the Cortem employees whom he named in his
affidavit was called. Mr Nigro’s responsibilities lay on the sales, rather than on the technical,
side. Although, according to Mr Venuti, his early email records have been lost, those that
remain amply justify his claim of constant communication on the subject of certification. In
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the circumstances, I am not disposed to reject his claim under the warranty for the reason that
he failed to give timely notifications of the products’ failure to satisfy Australian regulatory
requirements.
86 Save for the matter dealt with in para 87 below, no other basis upon which I should
reject Mr Venuti’s warranty claim was advanced by Cortem. For reasons explained above, I
am not satisfied that Mr Venuti suffered any loss or damage as a result of the SA series
junction boxes not conforming to current rules and regulations. However, he was not
challenged on his evidence that the EVF and FSQC products remained unsold because they
could not be certified, and I see no reason not to accept his proposition that the quantification
of his loss is represented by the amount which he paid for the products in question, namely
$12,775.29.
87 The other legal basis invoked by Mr Venuti for the present aspect of his cross-claim
was what he described as the “Sale of Goods (Vienna Convention) Act 1987, Articles 25 &
35”. I take it that Mr Venuti was here referring to articles 25 and 35 of Sched 1 to the Sale of
Goods (Vienna Convention) Act 1986 (NSW), the terms of which, by s 5 of that Act, have the
force of law in New South Wales. That schedule contains the provisions of the United
Nations Convention on Contracts for the International Sale of Goods (“the Vienna
Convention”). It applies to contracts of sale of goods between parties whose places of
business are in different States.
88 The provisions of the Vienna Convention upon which Mr Venuti relies are the
following:
Article 25 A breach of contract committed by one of the parties is fundamental if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result. Article 35 (1) The seller must deliver goods which are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by the contract. (2) Except where the parties have agreed otherwise, the goods do not conform with the contract unless they: (a) are fit for the purposes for which goods of the same description would ordinarily be used;
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(b) are fit for any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract, except where the circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on the seller’s skill and judgement; (c) possess the qualities of goods which the seller has held out to the buyer as a sample or model; (d) are contained or packaged in the manner usual for such goods or, where there is no such manner, in a manner adequate to preserve and protect the goods. (3) The seller is not liable under subparagraphs (a) to (d) of the preceding paragraph for any lack of conformity of the goods if at the time of the conclusion of the contract the buyer knew or could not have been unaware of such lack of conformity.
89 The following provisions of the Vienna Convention are also relevant in the present
circumstances:
Article 38 (1) The buyer must examine the goods, or cause them to be examined, within as short a period as is practicable in the circumstances. (2) If the contract involves carriage of the goods, examination may be deferred until after the goods have arrived at their destination. (3) If the goods are redirected in transit or redispatched by the buyer without a reasonable opportunity for examination by him and at the time of the conclusion of the contract the seller knew or ought to have known of the possibility of such redirection or redispatch, examination may be deferred until after the goods have arrived at the new destination. Article 39 (1) The buyer loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it. (2) In any event, the buyer loses the right to rely on a lack of conformity of the goods if he does not give the seller notice thereof at the latest within a period of two years from the date on which the goods were actually handed over to the buyer, unless this time-limit is inconsistent with a contractual period of guarantee. Article 40 The seller is not entitled to rely on the provisions of articles 38 and 39 if the lack of conformity relates to facts of which he knew or could not have been unaware and which he did not disclose to the buyer.
90 It was submitted on behalf of Cortem that “no Australian Sales of Goods legislation
applied to any sales of products between [Cortem] and [Mr Venuti]”. That was a sweeping
and, in my view, incorrect submission. Where an international contract for the sale of goods
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is made between persons resident in different states which have acceded to the Vienna
Convention (such as Italy and Australia) –
… the need for conflicts law is obviated. To the extent of its application, the convention, as implemented municipally, may be seen to operate as a mandatory law of the forum, although it is open to the parties to expressly exclude or contract out of the operation of the Convention.
(Davies, M, et al, Nygh’s Conflict of Laws in Australia, 8th ed, 2010, pp 420-421). The
Vienna Convention does, therefore, apply to the contracts by which Mr Venuti purchased the
products from Cortem which are presently under discussion.
91 Cortem also submitted that, under the agreement of September 2003, the parties had
chosen the court of Gorizia as their “forum contractus”, and that Mr Venuti’s claim could not,
therefore, be brought in an Australian court. If that were otherwise a good submission, it
would not be negated by any provision of the Vienna Convention. However, it is not, in my
view, a good submission. The agreement of September 2003, as its title implied, established
and regulated the relationship of manufacturer/distributor which existed between Cortem and
Mr Venuti. That Mr Venuti would purchase products from Cortem was contemplated by the
agreement: indeed, he was required to meet certain targets. But the agreement was not a
contract under which any particular goods were bought and sold. Each such contract was
constituted by the orders presumptively placed by Mr Venuti, and accepted by Cortem, from
time to time. It was governed by the printed conditions of sale referred to earlier in these
reasons. For international sales, the parties did not select the court of Gorizia as their forum.
Rather, they chose arbitration under the UNCITRAL rules but, as I have explained above,
Cortem placed no reliance on that circumstance. I consider that there is nothing in the
parties’ agreements under which the presently contentious products were purchased by
Mr Venuti that would stand in the way of this court adjudicating upon his claim under the
Vienna Convention.
92 This task is made the more difficult by the absence of any submissions on behalf of
Cortem about the terms of the Vienna Convention, or their applicability in the circumstances
of the case. Mr Venuti himself made only very high-level submissions on the subject, as
though it ought to be self-evident that the failure of the products in question to measure up to
TestSafe standards inevitably resulted in a contravention of Art 35 in some respect.
Nonetheless, the claim has been made, and must be dealt with.
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93 I do not consider that Art 35(1) of the Vienna Convention advances Mr Venuti’s case
against Cortem beyond the point it would reach under the contractual printed conditions of
sale with which I have dealt above. That is to say, by reason only of the failure of the
products concerned to conform to current rules and regulations, it may be concluded that the
products were not of the quality or description required by the contract within the meaning of
Art 35(1), but this is to go no further than to re-state the conclusion which I reached above
under the contract itself.
94 Turning to para (2)(a) of Art 35, Mr Venuti has not established, as a matter of
evidence, that the Cortem SA, EVF or FSQC products were not fit for the purposes for which
goods of the relevant description would ordinarily be used. He has established that they did
not pass the tests administered by TestSafe, but that is not, in my view, the same thing as
saying that they were not fit for the purposes referred to in Art 35(2)(a). It seems that the
products in question were supplied to Mr Venuti in much the same way as Cortem would
have supplied any other wholesaler, the problem being that, in Australia, the products
encountered a regime of testing to which they might not previously have been subjected.
There might be a sense in which the failure of the products to cross the Australian bar, as it
were, should be seen as giving rise to a contravention of Art 35(2)(a), but I was not addressed
on this aspect by Mr Venuti, and I am not persuaded that the matter should be so viewed.
95 The first factual issue which arises under para (2)(b) of Art 35 relates to the purpose
or purposes expressly or implicitly made known to Cortem by Mr Venuti at the time when
each relevant contract was made. With respect to the SA series junction boxes, the contracts
of sale were those made after the products had received TestSafe certification. Mr Venuti’s
purpose was, therefore, not the submission of products for certification, but the sale of the
products into the market. If this purpose was not expressly made known to Cortem, on any
view, it was implicit. Mr Venuti’s case that the products were not fit for that purpose is
complicated by the fact – covered by a finding which I have earlier made by way of inference
– that he did use the products for that purpose. There may well have been a technical lack of
fitness for purpose, but, as concluded above, Mr Venuti appears to have suffered no loss or
damage as a result.
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96 None of the other provisions of Art 35 appear to have any relevance to the SA series
of junction boxes. Cortem raised no defence under the exception to para (2)(b) or under
para (3).
97 Cortem did, however, make the general submission that Mr Venuti had never (until
after the commencement of the present proceeding) made a complaint about the faults or
defects of which he now complains. In relation to Mr Venuti’s post-certification experience
with the SA series junction boxes, that certainly appears to be the case. That circumstance
brings Art 39 of the Vienna Convention into play. Assuming that these junction boxes were
non-conforming apropos the terms of Cortem’s printed conditions of sale, I consider that
Mr Venuti ought to have given Cortem notice thereof within a reasonable time after he ought
to have known of the non-conforming circumstance. It seems clear that he did not do so. In
his affidavit of 7 December 2009, Mr Venuti stated simply that, after certification, “[t]he
products that I received subsequently for stock were not conformant because all had
insufficient thickness and neoprene gaskets”. Since certification had been achieved in
January 2004, I would have no hesitation in holding that a reasonable time had elapsed for
the purposes of Art 39(1) well before the filing of Mr Venuti’s cross-claim on 25 July 2008.
Indeed, although there is no evidence of the last occasion upon which Mr Venuti ordered
these junction boxes from Cortem, there is evidence that the last major sale made by Cortem
to Mr Venuti was on the latter’s order dated 21 December 2006. That order did not relate to
the SA series junction boxes. On any view, then, a period of more than 18 months passed
between the most recent relevant contract and the first occasion when Mr Venuti made a
claim which, on a generous interpretation, may be regarded as having relevance to Art 35 of
the Vienna Convention. That was, in my view, more than a reasonable time for the purposes
of Art 39(1). Of course, in relation to deliveries of junction boxes which occurred before
25 July 2006, Mr Venuti’s claim would lapse by the operation of Art 39(2).
98 Both because he has not established loss or damage and because of the operation of
Art 39, I would dismiss so much of Mr Venuti’s case in contract against Cortem that invokes
the provisions of the Vienna Convention in relation to the SA series junction boxes.
99 That leaves the claim under the Convention in relation to the EVF series products and
the single FSQC series product. As with the SA series products, I do not think that Art 35(1)
of the Convention advances Mr Venuti’s case beyond the point it would reach under
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Cortem’s printed conditions of sale. With respect to the application of Art 35(2)(a), I would
apply the same reasoning, and reach the same conclusion, as I did in relation to the SA series
products in para 94 above.
100 From this point, however, the analysis applicable to the relevance of the Convention
to the circumstances of the EVF and FSQC products diverges from that undertaken above in
relation to the SA products. That is because Mr Venuti’s purpose, and the outcome of the
TestSafe tests, were different. In his affidavit of 26 February 2010, Mr Venuti explained how
he came to purchase the EVF and FSQC products:
The denomination of those products, their overall aspects and general design was similar to those of the main international competitor, Cooper Crouse-Hinds. Based on the assurance from Mr Riccardo Gratton and Mr Massimo Zorzin that their products were “as good as” those offered by their international competitors, I started to promote those products to the Australian industry, exhibiting at four important Australian shows in Sydney in 2003 and 2004. I purchased from Cortem and paid in full substantial stock of those products, based on the assurance given by Mr Gratton and Mr Zorzin that those products were fully compliant with all applicable Standards and had been thoroughly tested and approved by CESI in Italy. Based on these “guarantees” given by the Applicant, certification for all these products was expected to be achievable.
Neither Mr Gratton nor Mr Zorzin was called. Indeed, Mr Venuti was not cross-examined on
this aspect of his affidavit. I must, therefore, accept that, at the time of purchase, Mr Venuti
had made known to Cortem that his purpose was to sell these products into the Australian
market by way of wholesale trade. It seems clear that the goods were not fit for that purpose,
because they had not achieved TestSafe certification and, as Mr Venuti later discovered, they
were incapable of certification in their then condition. I would hold, therefore, that, by the
operation of Art 35(2)(b) of the Vienna Convention, these products did not conform with the
contract pursuant to which they were sold by Cortem to Mr Venuti. Again, it was not here
suggested by Cortem that the exception to para (2)(b), or that para (3), had any application in
the circumstances.
101 In the case of the EVF and FSQC series products, it cannot be said that Mr Venuti did
not notify Cortem of their lack of conformity with the contracts under which they were sold.
Here I refer to my reasons in para 95 above. In the circumstances, Mr Venuti’s right to make
a claim in reliance on Art 35(2)(b) is not defeated by Art 39(1) or (2).
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102 The result of the application of the Vienna Convention to the sales by Cortem of the
EVF and FSQC products is, of course, the same as that reached directly under the printed
conditions of sale. Subject possibly to the matter considered next in these reasons, Cortem is
liable to Mr Venuti in damages quantified at $12,775.29.
103 There was a further submission made on behalf of Cortem in response to Mr Venuti’s
claim in relation to allegedly faulty or defective stock. It was that the items in question had
been assigned (voluntarily, it would appear) to Controlmatic Pty Ltd when that company took
over the business, that the liquidator ultimately valued all the remaining stock (including
many more items than those with respect to which I have upheld Mr Venuti’s claim) at
between $7,500 and $18,500, and that the liquidator had destroyed it. Since I have upheld
Mr Venuti’s claim only with respect to the EVF and FSQC series products, I shall confine my
treatment of this point to those products. As so confined, the point is one which I have
difficulty following. Mr Venuti received no consideration from Controlmatic Pty Ltd for
these products. On the findings I have made, they were commercially worthless in Australia.
Given the nature of the breach of contract which I have found against Cortem, I consider that
Mr Venuti’s damages ought to be measured by the sum that he paid for the products. His
entitlement is not, in my view, defeated by the circumstances in which he came to dispose of
the products, or by the ultimate fate of them.
DISPOSITION OF THE PROCEEDING
104 I shall make the injunction referred to in para 57 above and award Cortem damages
under s 82 of the Trade Practices Act in the sum of $222,558.18, but otherwise dismiss its
application. I shall award Mr Venuti damages in the sum of $12,775.29, but otherwise
dismiss the cross-claim. I shall stay the execution of judgment on the cross-claim until after
Mr Venuti has paid Cortem’s damages in full, but I shall allow him to set-off the sum due to
him under the cross-claim. I shall hear the parties on the question of costs.
I certify that the preceding one hundred and four (104) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jessup.
Associate:
Dated: 13 August 2010
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