United Beverage Co-Packers Pty Ltd v Proclear International Pty Ltd; Proclear International Pty Ltd v United Beverage Co-Packers Pty Ltd (No 4)

In 2012 Mr Boden Lazar, a director of the plaintiff, [1] Proclear International Pty Limited, began looking for an alternative protein drink to the heavy, dairy like protein beverages then available in Australia.

Mr Lazar claims that he conceived a protein water beverage, said to be unique in the Australian market, known as “Bodie’z Protein Water”.

On 2 April 2017, Proclear entered a Manufacturing Agreement (“the Agreement”) with the first defendant, [2] United Beverage Co-Packers Pty Limited (“UBC”) to manufacture “the Product” as defined in the Agreement in accordance with the “Specifications” referred to in the Agreement.

The second defendant, [3] RJ8 Pty Limited, also executed the Agreement, although it is not named as a party to it.

The third defendant [4] is Mr Michael Gordon, a director of UBC and RJ8. Mr Gordon and his companies assisted with the formulation of Bodie’z Protein Water.

Proclear claims that:

Proclear also makes two discrete claims regarding over charging and an agreement to obtain a particular food certification.

In separate proceedings, which were heard together with the Main Proceedings, UBC claims an amount for unpaid invoices.

The claims made by Proclear against Mr Gordon personally were abandoned during final submissions.

Proclear has not made out any of its claims against UBC.

UBC is entitled to judgment in the amount claimed.

Under the Agreement, Proclear appointed UBC “to manufacture the Product at [UBC’s] premises in accordance with the Specifications in Schedule 4”. [5]

Proclear agreed to provide UBC “the Specifications for the sole purpose of manufacturing the Product in accordance with this Agreement”. [6]

It is common ground that no Specifications were attached to the Agreement at the time it was executed.

There is controversy as to how and when Specifications were agreed. As Proclear’s case was ultimately developed, [7] it is not necessary to resolve that question.

The Agreement defined “Product” to mean “the products described in the Schedule 1”.

Schedule 1 was in the following form:

The Agreement provided for a “Product Category” which was defined to mean, relevantly:

The Agreement provided that Proclear “must provide all Unique Ingredients”. [9]

The expression “Unique Ingredients” was defined to mean any ingredient that is not a “Non-Unique Ingredient”, that is any ingredient that is not a “generic ingredient such as water or sugar”.

I shall refer to other relevant terms of the Agreement as necessary in the context of my consideration of the claims made by Proclear.

In their closing submissions, Mr Alexis SC, who appeared with Mr Michael for Proclear, described this as Proclear’s “principal claim”.

As articulated in its Further Amended Commercial List Statement, Proclear’s claim was expressed in terms of “Trade Secrets”, an expression not used in the Agreement.

The relevant allegation is that “UBC and RJ8 have disclosed or used the Trade Secrets to assist third parties” and that:

Proclear alleges that by this conduct, UBC and RJ8 breached cll 11.3 and 11.5 of the Agreement.

Those clauses provided, relevantly:

“Confidential Information” was defined to mean, so far as concerns Proclear, “the items specified in clause 11.1”.

Clause 11.1 provided that UBC acknowledged that, relevantly, the following “is information confidential to [Proclear]”:

It emerged during closing submissions that Proclear accepted that the only relevant part of this definition of Confidential Information is the word I have emphasised: “formulas”. Proclear does not contend that UBC has misused any Confidential Information that may form part of the “Specifications”, any “process information” or which came into its possession pursuant to or as a result of the Agreement.

Clause 11.9(c) of the Agreement provided that the “obligations in this clause 11 do not apply to a part of the Confidential Information … which is in or comes into the public domain.”

This is a critical provision, for reasons which will emerge below.

Proclear’s claim is now confined to UBC’s and RJ8’s alleged use of what the parties referred to as the “MFI-20 Formula” to manufacture products for third parties.

Prior to delivery of Proclear’s opening submissions, the claim made by Proclear was much wider and was particularised to include what the parties referred to as “Finished Product Specifications”.

The MFI-20 Formula is said to be “[t]he following combination of ingredients, formulation and techniques for the manufacture of clear protein water beverages”:

In their closing submissions, Mr Alexis and Mr Michael emphasised the following three matters in relation to the MFI-20 Formula:

In closing address, Mr Alexis said:

A short time later, Mr Alexis said that the MFI-20 Formula “reflects the method that was used to manufacture our product”. Mr Alexis took me to batch sheets which appear to show that the elements in the MFI-20 Formula were amongst the elements used to make Proclear’s “Bodie’z” product.

It is common ground that it is not possible to make a “clear protein beverage”, or any Bodie’z product, using only the five elements in the MFI-20 Formula.

There is a dispute, to which I will return, as to whether the MFI-20 Formula was, in truth, a formula at all.

As to the provenance of the MFI-20 Formula, Mr Alexis accepted that he and Mr Michael had:

Mr Alexis accepted that “there is no document like a batch sheet which distils the essential part of the method into the document like [the MFI-20 Formula]”.

Mr Alexis submitted, however, that this was “not the point” and that the fact that there was no such document “cannot of itself lead to the result that the information is not confidential”.

So much may be accepted.

But, as I set out below, there are other problems.

There was a dispute about the proper construction provisions of the Agreement relating to Confidential Information. The dispute concerned what was said to be a tension between cl 11.1, referred to above, and cl 11.2, which dealt with the Confidential Information of UBC, and the relationship between those two clauses and cl 5.2, which dealt with improvements or modifications to the formulation of product.

Because Mr Alexis and Mr Michael accepted that none of the elements in the MFI-20 Formula comprised “process information”, [11] it is not now necessary to resolve that dispute.

In addition to relying on the provisions in the Agreement to which I have referred, Proclear alleges UBC and RJ8 are in breach of an equitable duty of confidence.

It is common ground that the relevant principles are set out in the judgment of Gummow J in Corrs Pavey Whiting & Byrne v Collector of Customs (Vic). [12] These were recently summarised by the Court of Appeal in Filby v TEG Live Pty Ltd, [13] as follows:

A number of expressions were used in the evidence, including the MFI-20 Formula, discussion of which is useful at this point.

“Protein water” was not defined by the parties beyond what Mr Lazar has said in his affidavit of 6 April 2023, as follows:

A “co-packing manufacturer” is a contracting manufacturer to which a company, such as Proclear, might outsource the manufacturing and shipping of products. As Mr Russell, who appeared for UBC stated, it is used to described “contractors who do the manufacturing for you”. UBC was co-packing manufacturer. It manufactured the Bodie’z products for Proclear, as well as a number of other products for third parties.

There was no evidence before me as to what “pH” means. There was no dispute that, for the purpose of these proceedings, it has its ordinary meaning as “a measure of acidity” with “pure water ha[ving] a pH of 7, acidic solutions … lower pH values and alkaline solutions higher values.” [14]

An “acidulant” is a product used to reduce the pH of a product. Examples of acidulants include phosphoric acid and hydrochloric acid.

“Pre-acidified protein” are proteins that are pre-acidified, that is, proteins that have a lower pH.

“Whey protein” is a type of pre-acidified protein. “Whey protein isolate” is a whey protein that has a protein content concentration greater than 90%.

A Hot Fill Process is a method of food packaging that uses heat to sterilise a product and its container. It was used by a Western Australian company, Planet Sales Pty Limited, from 2013 to manufacture a protein beverage product for a company associated with Mr Lazar. The process involves treating the beverage to a high heat for a short period, pouring it into the bottles while still hot, and then allowing it to cool in the bottle.

Cold Flash Process is a method of food packaging that also seeks to sterilise or pasteurise a product. The process involves exposing the product briefly to heat and then to rapid cooling before pouring it into the bottle. It was the process used by UBC at its Unanderra factory. I discuss both Hot Fill Process and Cold Flash Process further below. [15]

Mr Alexis and Mr Michael submitted that the MFI-20 Formula is said by Proclear to be the “core formula used to make Bodie’z protein water”.

As I have said, it is common ground that it is not possible to make a protein beverage using only the five elements of the MFI-20 Formula.

The ordinary meaning of “formula” is, relevantly, a “recipe or prescription”, [16] “a prescription or detailed statement of ingredients; a recipe”, [17] “a list of ingredients with which something is made”, [18] “a method, pattern, or rule for doing or producing something, often one proved to be successful”, [19] or a “list of materials and directions for preparing a dish or drink”. [20]

Care must be used when considering words used in an agreement by reference to dictionary definitions. Thus, it has been said: [21]

Neither party referred to authority dealing with the meaning of “formula”. My own research has revealed that, in Chaina v The Presbyterian Church (NSW) Property Trust, [22] Hoeben J said, in the particular context of that case, that “the formula will identify the component parts of a product and their quantity”. [23] Similarly, in Australian Medic-Care Company Ltd v Hamilton Pharmaceutical Pty Ltd, [24] Finn J, in the particular context of that case, referred to a “production formula which listed the ingredients of the product and their proportions”. [25]

Mr Russell pointed to a document that Mr Gordon prepared in or around October 2014 to enable Planet Sales to manufacture a beverage using the Hot Fill Process to which I referred at [56] above. That document was in the form attached to this judgment. [Attachment Redacted]

Mr Russell submitted, and I accept, that this document can be said to be a “formula”, in the sense of these definitions. It is a list of the ingredients, and the quantities or proportion of those ingredients, needed to create a product.

As one cannot make any product using the five elements of the MFI-20 Formula, I am not persuaded that it can be said to be a “formula” for the purpose of cl 11.1(c) of the Agreement.

In any event, there are further problems.

As I have said, Mr Alexis accepted in closing oral submissions in reply that each of the five elements of the MFI-20 Formula is in the public domain.

The critical question is thus whether the combination of the five elements is, nonetheless, the subject of an obligation of confidence.

It is nonetheless necessary to look at each of the five elements of the MFI-20 Formula in some detail.

In large part, the following analysis is drawn from Mr Russell’s closing submissions. They were not challenged, nor indeed addressed, in Mr Alexis’s and Mr Michael’s submissions in reply.

The pre-acidified protein used in the Bodie’z products was whey protein isolate. The whey protein isolate used was originally Hilmar 9420, [26] then Agropur/Davisco [27] and finally, Fonterra. [28]

Mr Lazar agreed in cross-examination that whey protein isolate is a commonly used ingredient in beverages and in food.

This is also a well-known process.

A document published by the United States Dairy Export Council in 2006 entitled “U.S Whey Proteins in Ready-to-Drink Beverages” states that “[w]hey protein’s strong buffering capacity requires the use of considerable amounts of acid in the formulation to bring the starting pH from around 6.5 down to 3.5 or lower”, and that a common acidulant used to achieve this includes phosphoric acid.

Product and application bulletins issued by Hilmar for a variety of “flavoured protein waters” specify, as a part of the formulation “procedure”, the addition of acidulants, including phosphoric acid, to reduce the pH of the beverage.

On 20 November 2017, Mr John Forbes, from MPD Dairy Products, sent an email to Mr Gordon enclosing product and application bulletins for a number of Hilmar products, including a “Clear Hi-Protein Sport Drink” showing, under the heading “Procedure”, the use of phosphoric acid or other acidulants to reduce the pH level of the beverage.

Mr Lazar had received similar specifications earlier from Mr Forbes.

These are not confidential matters. They were matters that Hilmar, as the manufacturer of the whey protein isolate, published in relation to the product.

These matters were all in the public domain.

Mr Gordon gave evidence that, in any event, UBC’s use of acidulants in relation to the products manufactured by third parties was for the purpose of affecting the flavour of the product, not to reduce the pH level. Mr Gordon was challenged about that on the basis that it appears that the amount of acidulants used by UBC in the products manufactured for third parties was the same or “substantially the same”, regardless of flavour. But Mr Gordon, who is deeply experienced in this field, did not accept that “the amount of citric acid [varies] depending upon the flavour of the beverage being produced”, or that the variations posited were “small variations”. I see no reason not to accept his evidence.

There was no dispute about the following matters, which appear from the evidence of Dr Geoffrey Smithers, the expert food biochemist called on behalf of UBC.

Antifoam has been used in the manufacture of beverages and foods for at least 80 years. Its function is to reduce or prevent foaming during the manufacturing process. It is a processing aid the use of which is regulated by the Food Standards Code. A wide range of antifoams is commercially available.

Mr Gordon knew of antifoams from as early as 2002. He learnt of antifoams in his dealings with other drink manufacturers for whom he had acted as a co-pack manufacturer long before he met Mr Lazar in 2013.

In the course of those dealings, Mr Gordon became aware of the use of antifoam as an ingredient to reduce or prevent product foaming out of the top of the bottle during the manufacturing process.

The use of antifoam is therefore not confidential to Proclear. It is in the public domain.

During the trials of Bodie’z products at UBC’s factories before the execution of the Agreement, antifoam was used in the batching process.

After the trial run in February 2017, and before the Agreement, Mr Gordon raised with Mr Lazar the problem that the product was foaming too much in the batching tank and suggested putting in antifoam first to see whether it assisted with the foaming. Mr Gordon confirmed this in cross-examination:

Mr Gordon confirmed that he then advised Mr Lazar that putting in antifoam first reduced the foaming, and that antifoam was then added as the first ingredient in the batching process when batching Bodie’z products at that time:

Mr Gordon was taken to UBC’s batch sheets for 2017 production runs of Bodie’z products which listed antifoam as the first ingredient in the list of ingredients, and he confirmed that, in 2017, antifoam was batched as the first ingredient:

Mr Gordon elaborated that where the volume of the production run was higher so that it could not be batched in a single tank, [29] antifoam would be batched first, and it would also be repeated during the batching process:

However, this evidence distracted attention from the fact that, from 2017 to March 2019, UBC used a batching tank during the batching of ingredients. It was when the batching tank was in use that antifoam, in powder or liquid form, was batched first or in stages, depending on the size of the manufacturing run.

However, both Mr Gordon and his business partner, Mr James Lovric, gave evidence that after UBC changed from using a batching tank to using a powder funnel and emulsion pump in about March 2019, UBC’s standard batching process changed to batching dry ingredients before wet ingredients to prevent the dry ingredients sticking to the side of the funnel during batching. That practice continues today.

Antifoam is a wet ingredient.

Thus, from March 2019, antifoam was batched with the wet ingredients and not batched in accordance with the MFI-20 Formula.

Further, Mr Gordon’s unchallenged evidence was that in relation to UBC’s manufacture for third parties, antifoam was not ever batched as the first ingredient. I return to this below.

Thus, the fact that antifoam was, at the outset, “used as the first ingredient in the batching stage”, was not because of any Confidential Information used to manufacture the Bodie’z products, but because of Mr Gordon’s suggestion that this was an appropriate course to follow, bearing in mind the particular machinery used by UBC for the batching process. When that process changed, antifoam was no longer used as the first ingredient. These were mechanical matters which could not be said to be confidential.

In about 2015, Mr Gordon was advised by Victus International Pty Ltd, a provider of ingredients to the natural food industry, including Velcorin, that all whey protein isolate powders contain ammonia, and that the Velcorin may react with the ammonia to cause a carcinogenic byproduct if not treated with phosphoric acid to lower their pH to a pH of 3.2 or less.

On 21 August 2015, a representative of Victus passed on to Mr Gordon a letter from the manufacturer of Velcorin, LANXESS Deutschland GmbH, confirming that Proclear’s products were suitable to manufacture with Velcorin but strongly recommending that the pH be adjusted to a pH of 3.2.

On 18 July 2017, a representative of Victus sent Mr Gordon a “Velcorin suitability information sheet” stating that Velcorin was only “partially suitable” for products having a pH greater than 4, or for products with a protein content.

As a result of that information, Mr Gordon caused UBC to manufacture all products containing whey protein isolate with a pH of less than 3.2.

Thus, in UBC’s manufacturing process, pH 3.2 represented the limit rather than the target for UBC’s whey protein isolate beverages.

Thus, there has never been a “pH range of typically approximately 3.2 but not higher than 4” for Proclear’s product as asserted in the third element of the MFI-20 Formula.

Further, UBC has not used any such pH range when manufacturing the allegedly infringing products for third parties.

Dr Smithers gave unchallenged evidence about this matter as follows.

Pasteurisation is a “foundational food processing technique” to enhance shelf life and render a food or beverage safe to consume.

Pasteurisation has been used commercially in Australia for more than a century and is one of the most recognised and accepted food processing technologies.

Dr Smithers described pasteurisation as the technique of heating a beverage to 72°C for 15 seconds, or for an equivalent time-temperature combination; for example, 79°C for 2 seconds; 63°C for 30 minutes.

The primary aim of pasteurisation is to ensure that the perishable product being treated is safe, with the secondary aim being to extend shelf life to allow for transport and distribution.

I have referred above to the difference between the Hot Fill Process used by Planet Sales in Western Australia and the Cold Flash Process used at the UBC factory. [30]

Dr Smithers gave the following uncontested evidence concerning Cold Flash Process.

The Cold Flash Process, sometimes referred to as High Temperature Short Time (“HTST”) treatment, is a process that includes a very short thermal exposure and rapid cooling of the product once treated. The term “flash pasteurisation” is often used. The key features of Cold Flash Process are:

The Cold Flash Process is one of the most typical and widely used technologies in food processing, including in the manufacture of beverages.

Cold Flash Process has been used in Australia for milk processing for more than 70 years and by juice manufacturers in Australia for at least 50 years.

Thus, this fourth element of the MFI-20 Formula is in the public domain and the information that Mr Gordon and UBC had about it was given to them without any restrictions as to its use.

There was no challenge to the following evidence, summarised in Mr Russell’s closing submissions.

UBC’s pasteuriser is a machine consisting of a series of pipes that continuously heat and cool the product as the product passes through the pipes. There is no tank or other area where the product is collected, heated and then released for filling. The product is continuously pasteurised as it flows through the pasteuriser.

Heating and cooling of the product occurs in different sections of pipes in the pasteuriser. Using settings at first strike 92.5°C, second strike 85°C, third strike of 16°C, and a flow rate of 2,500L/hour, those sections are:

Neither Bodie’z products nor any other pasteurised product manufactured by UBC are pasteurised for the time and temperature alleged in the MFI-20 Formula.

The strike points and flow rate are set by an operator using a touch screen on the pasteuriser by selecting a “recipe”. The recipe is a set of pre-saved temperature and flow rate specifications which are saved by bottle, as I discuss below. [32]

Further, if the product is not immediately required for filling, it will be returned to the pasteuriser to be pasteurised again. This means the product may go through the pasteuriser more than once.

UBC has always used and continues to use the following “Default Settings” as its standard settings on the pasteuriser for all pasteurised products:

UBC has only changed the Default Settings where:

The Default Settings were chosen by Mr Gordon.

Further, the Default Settings are used as the pasteurisation settings across all of UBC’s pasteurised products.

The Default Settings are not specific to Bodie’z products or to Proclear. Rather, as I have said above, the default settings are pre-saved in the pasteuriser’s touch screen as “recipes” referring to bottles sizes. The “recipes” do not refer to a particular product and are common across all products in a particular bottle size.

These pasteurisation temperatures and times were adopted for all pasteurised beverages manufactured by UBC and were adopted before any product of Proclear was manufactured at UBC.

Thus, as Mr Russell submitted, the fourth element of the MFI-20 Formula is a process used by UBC in its factory for all pasteurised beverages and is not one used specifically for Bodie’z products.

It appears that Mr Lazar was happy with the product produced by pasteurising at the Default Settings and those settings were used thereafter.

As I have set out, in closing submissions Mr Alexis submitted that it was the making of protein water using the Cold Flash Process that was the “something new”.

Dr Smithers gave uncontested evidence that Velcorin has been used in the manufacture of alcoholic and non-alcoholic beverages for more than 40 years, and in Australia since the 1990s. It has been used in a range of beverages, including fruit and vegetable juice and juice products, water based flavoured drinks, formulated beverages, wine, comprising sparkling, fortified and fruit and vegetable wine, and mead and cider.

UBC’s factory at Unanderra was set up to use the Cold Flash Process, and that process was used to manufacture all of Bodie’z products.

But this was not something unique to Bodie’z products.

UBC used the Cold Flash Process for all the non-carbonated products that it manufactured.

There is now no dispute that, like all the other elements in the MFI-20 Formula, the use of the Cold Flash Process, with Velcorin used to sterilise the beverage, is a matter that is in the public domain.

There now being no dispute that each of the five elements of the MFI-20 Formula is in the public domain, the contest comes down to whether, nonetheless, the combination of those elements, when used together, is confidential.

Mr Alexis and Mr Michael emphasised the following passage from the judgment of Stern JA in Filby v TEG Live: [33]

Her Honour referred to the decision of Megarry J, as the Vice Chancellor then was, in Coco v AN Clark (Engineers) Ltd, [34] where his Lordship said: [35]

Her Honour also referred to the observations of Harris J in Talbot v General Television Corporation Pty Ltd, [36] that a “commercial twist” or “particular slant” may give something a quality which takes it “out of the realm of public knowledge”, [37] and to the observations of Hirst J in Fraser v Thames Television Ltd, [38] that it is not necessary that the elements of a concept be unique if the concept itself is novel or consists in “a significant twist or slant to a well-known concept”. [39]

Stern JA did not need to consider this question further because her Honour found that the relevant information, being about a particular manner of promoting a concert tour, although capable of commercial application, was not unique and did not “give publicly available information such a ‘commercial twist’ that the information that [Mr Filby] conveyed had the necessary quality of confidence”. [40]

That appears to me to be the situation in this case.

It is not obvious to me why the combination of the five elements of the MFI-20 Formula, each of which is in the public domain, can be said to be confidential or to attract an obligation of confidence.

Returning to what Mr Alexis emphasised as being “something new”, that is the making of protein water using the Cold Flash Process, this was simply the product of the application of the processes that Mr Gordon caused UBC to apply to all beverages that it manufactured.

I see no “significant twist or slant to a well-known concept” that would render the use of this publicly known information the subject of an obligation of confidence.

There is no evidence before me that the combination of the elements of the MFI-20 Formula is a confidential matter.

Proclear called no expert to say so.

In closing submissions, I asked Mr Alexis whether Mr Lazar had made any such assertion.

Mr Alexis pointed to the following passage from Mr Lazar’s confidential affidavit of 7 April 2023:

What then followed in Mr Lazar’s affidavit, under the heading “Pre-acidified proteins and adjustment of pH level”, “Temperature and timing of pasteurisation”, “Batching of antifoam” and “Use of cold fill pasteurisation with Velcorin” were the first, fourth, second and fifth elements, respectively, of the MFI-20 Formula.

As it is now common ground that it is not possible to make any of Bodie’z products in those manners, [41] they do not “provide a recipe or blueprint for making the product”.

Although Mr Lazar asserted that the “combination of these elements” was “highly commercially sensitive” to Proclear, he did not address the question, now proven by UBC and accepted by Proclear, that the elements Mr Lazar described were in the public domain. Nor did Mr Lazar assert, let alone prove, that he had brought to bear some “commercial twist” or “new slant” that would somehow render the combination of these publicly known elements confidential to Proclear. I do not see the use of these well-known elements to manufacture a protein water as being sufficient to attract an obligation of confidence to the resultant combination. As with Mr Filby, Mr Lazar’s “blueprint” may well have been “capable of commercial application”, [42] but I am not persuaded it had the necessary quality of confidence.

It may well be, as Mr Alexis and Mr Michael, submitted, that Bodie’z products are the dominant protein water in the market.

It is also true that the development of the technique that includes the elements in the MFI-20 Formula was undertaken over a number of years. There was no dispute about this, and the parties devoted many paragraphs of their submissions to this topic.

However, as I have explained, the ideas that came to be incorporated into the MFI-20 Formula were born of knowledge openly communicated to Mr Gordon from third parties and passed on by Mr Gordon to Mr Lazar.

In the context of Mr Gordon devising the formula, in the true sense of the word, set out at [63]-[64] above, for the manufacture by Planet Sales in Western Australia of a protein water for an entity associated with Mr Lazar, Mr Lazar and RJ8 entered a “Mutual Service Agreement” in about July 2013. Planet Sales manufactured the product, using the Hot Fill Process, for a number of years.

There is no executed copy of this document in evidence. Evidently, a number of iterations were circulated.

The version in evidence provides that RJ8 was to provide “R&D services to create 1 line with 3 varieties of a product conceived and owned by Boden Lazar” and that:

I do not see that this takes matters any further. No breach is alleged of this agreement. Mr Alexis accepted in argument that such rights and obligations that the parties may have had under it have now merged in the Agreement, which now sets out the metes and bounds of the parties’ rights and obligations. For the reasons I have set out, to the extent that any “concept conceived by [Mr] Lazar and confidentially shared with RJ8” is now to be found in the MFI-20 Formula, it does not have the requisite quality of confidence.

Mr Russell submitted that, in any event, the MFI-20 Formula lacked the requisite degree of specificity to attract an equitable obligation of confidence.

In that regard, Mr Russell focused on the words “typically” and “approximately” as set out in the third and fourth elements of the MFI-20 Formula.

I do not find it necessary to make any finding about this submission, save to say that no party suggested that the equitable duty of confidence could, in the circumstances of this case, range more widely than that specified in the Agreement.

Mr Russell submitted that the provisions of cll 11.3 and 11.5 in the Agreement constituted unreasonable restraints of trade that are contrary to public policy and unenforceable against UBC.

The submission was pressed only faintly, comprising one paragraph out of the 440 paragraphs in Mr Russell’s submissions.

I do not find it necessary to resolve this question, save to observe that to the extent that there was information confidential to Proclear the subject of the Agreement, it is hard to see why restraints against the use by UBC or RJ8 of that Confidential Information could offend public policy.

As I have said, RJ8 is not named as a party to the Agreement. Indeed, “parties” is defined in the Agreement to mean Proclear and UBC, not RJ8.

However, RJ8 executed the Agreement and is the subject of a number of obligations, including, as I discuss below, the obligation in cl 10.8 not to manufacture for any third party products within the definition of “Product Category”.

Mr Russell submitted that, nonetheless, RJ8 is not bound by the obligations of confidence in cll 11.3 and 11.5 because it is “neither referred to nor the subject of the provisions of cl 11”.

Mr Russell’s point was that although cl 11.1 contains an acknowledgment by UBC, described there as the “Manufacturer”, that certain information is confidential to Proclear, described there as the “Customer”, subcll 11.3 and 11.5 do not refer to the “Manufacturer” or to the “Customer” but rather to the “receiving party”.

However, I think it clear that when the parties referred to the “receiving party” they were using a generic expression intended to include any party to the Agreement who received Confidential Information.

Although RJ8 is not named as a party to the Agreement, because it signed the Agreement and is the subject of specific obligations under it, it is, in my opinion, a “party” to the Agreement.

However, Mr Russell raised a wider point later in his submissions as follows:

Mr Alexis and Mr Michael made no response to that submission.

In view of my earlier conclusions, it is not necessary for me to decide this point, but it does appear from Mr Russell’s submissions that Proclear has not established any breach by RJ8 of its obligations under cll 11.3 and 11.5.

In light of my conclusions as to the question of confidential information, it is not necessary for me to express any view as to whether, assuming the MFI-20 Formula was confidential, there has been a breach by either UBC or RJ8 of their obligations under the Agreement.

In closing submissions, Mr Alexis submitted that, assuming that the MFI-20 Formula was confidential, there was no doubt that UBC was using it in breach of its obligations under the Agreement.

However, this overlooks Mr Gordon’s evidence, in his affidavits of 27 September 2023 and 23 September 2024, that:

Thus, although it is not necessary for me to decide this question, it appears that even if the MFI-20 Formula was confidential, it has not been misused by UBC.

Again, in view of my conclusions concerning the MFI-20 Formula, it is not necessary for me to deal with the relief sought by Proclear.

However, I will deal with that question, albeit briefly.

In relation to its claim for breach of the equitable duty of confidence, Proclear elected for an account of profits.

Proclear claimed an amount of $753,006.39, or alternatively $624,586.24, against UBC and $2,877.45, or alternatively $5,987.75, against RJ8.

There was no dispute about the relevant principles. As Mr Alexis and Mr Michael submitted, the remedy of an account of profits is confined to profits actually made. Overheads may be deducted where the defendant can demonstrate they are attributable to obtaining the relevant profit. If the overheads would have been incurred in any event, they will not be deducted. [43]

The onus of proving the costs to be taken into account in the determination of profit, such as overheads, lies on the defendant, partly because the facts relevant to the incurring of such costs will lie peculiarly within the defendant’s knowledge. [44]

Where, as is the case here, there is no order for the separate determination of damages, evidence on the account of profits must be adduced as part of the trial. [45]

Proclear calculated the revenue earned by UBC by reason of its manufacture of the allegedly contravening products by reference to the invoices UBC sent to the relevant parties. There was no dispute about that.

There was a dispute as to whether UBC had established the costs of goods sold and overheads attributable to that revenue.

UBC’s evidence in relation to those matters comprised spreadsheets that Mr Gordon exhibited to one of his affidavits. Those spreadsheets were evidently prepared for the purpose of the proceedings. Mr Gordon was not able to say that he had played any role in their preparation.

Mr Alexis and Mr Michael submitted that it was difficult to see from the spreadsheets what costs and overheads are attributable to UBC’s manufacture of the allegedly contravening products. Further, it was submitted, some expenses related to payments made by UBC to related entities for the use of manufacturing equipment and premises in circumstances where the detail of those expenses was not clear.

I was not taken to the detail of these matters in closing submissions.

Ultimately, Mr Russell submitted:

In view of my conclusions as to the MFI-20 Formula, it is not necessary that I consider this further.

Alternatively, on its contractual claim, and only if it did not obtain an account of profits, Proclear sought damages against UBC for the loss of opportunity to sell Bodie’z products into the same market in which the allegedly contravening products were sold.

There was no dispute as to the relevant principles. It was necessary for Proclear to show, on a balance of probabilities, that there was “a real (more than negligible) possibility” of that opportunity. [46]

The loss of the chance or opportunity is capable of being compensated even if the probability of the plaintiff being able to exploit it is less than 50/50. [47]

Once that is established, then:

This is usually done by discounting the loss by a percentage, although this is not essential.

Proclear’s case was that for every unit of the allegedly contravening products sold, there was at least a real prospect of a Bodie’z product being sold to the same consumer.

There is no direct evidence to support this submission, although it does appear that the Bodie’z product was the only other protein water in the market.

Proclear sought to establish its damage by calculating its net profit per bottle, multiplying that figure by the total number of contravening products sold, and discounting the result by 40% to reflect the prevailing contingencies.

There is no dispute that, in principle, this was the appropriate manner to assess Proclear’s damages, assuming that the MFI-20 Formula was confidential.

There was some debate as to the precise figures and as to the appropriate percentage discount, bearing in mind the different outlets at which the contravening products were sold compared to those used for the Bodie’z product.

The range of damages resulting from the parties’ competing contentions was between $298,642.73 and $367,026.45.

I do not consider it necessary for me to consider this matter further.

Proclear’s claim in relation to UBC’s and RJ8’s alleged misuse of Proclear’s Confidential Information fails.

Clause 10.8 of the Agreement provided:

As I have mentioned, “Product Category” was defined to mean, relevantly, “clear protein beverages”.

“Product” was defined to mean “the products described in the Schedule 1”. I have set out Sch 1 at [17] above. It listed seven Bodie’z clear protein beverages with various flavours.

Proclear contends that UBC and RJ8 manufactured for third parties a variety of “clear protein beverages” in contravention of this promise.

UBC’s and RJ8’s obligations under cl 10.8 only endured during the 12-month period following the termination of the Agreement.

There is a dispute between the parties as to when the Agreement was terminated. UBC contends the termination took place on 7 December 2021. Proclear contends that the termination took place on 24 January 2022.

It is not necessary for me to decide which of these contentions is correct because, as Mr Alexis made clear during closing submissions, the amount that Proclear seeks to recover from UBC and RJ8 does not depend on whether its contention as to when the Agreement was terminated is correct.

UBC also contends that the Agreement was abandoned as early as 7 December 2021 “if not before”. Again, it is not necessary that I come to any decision about that.

The critical issue that arises is what, as a matter of construction, the parties meant by the expression “clear protein beverage”.

There was no dispute as to the relevant principles.

The meaning of a contract is:

Further, as has been correctly stated: [50]

The leading modern statement concerning the importance of context and purpose is in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [51] as follows: [52]

In its Amended Summons, Proclear sought a declaration that:

That is how Mr Alexis opened Proclear’s case. Thus he said:

However, in closing submissions, Mr Alexis and Mr Michael sought to develop an alternative and preferred construction of Product Category which was captured in a proposed Second Further Amended Commercial List Statement as:

In support of that contention, Mr Alexis and Mr Michael pointed to evidence suggesting that the parties understood that the expression “clear protein” was a synonym for pre-acidified protein.

Otherwise than inferentially, by reason of a reference in Proclear’s opening submissions as to the use “in the industry” of the term “clear protein”, and questions that Mr Alexis asked Mr Gordon in cross-examination, this amended case had not been foreshadowed. It was contrary to the way the case was pleaded and had been opened. Unsurprisingly, Mr Russell informed me that he would have conducted his case differently, and would have, in particular, cross-examined Mr Lazar differently, had he understood this to be Proclear’s case. I refused leave to Proclear to amend its case in this way.

UBC’s contention as to the proper construction of the expression “clear protein beverage” is set out in its Amended Commercial List Response as follows:

In closing oral submissions, Mr Russell submitted that “clear” in this context meant something more than “not opaque”.

Thus, as framed in the parties’ pleaded cases, the debate focused on the word “clear”. Leaving aside Proclear’s attempt to raise, at the last moment, the “clear protein” point, there was no dispute about what “protein” or “beverage” meant, it being common ground that the allegedly contravening products manufactured by UBC for third parties were “protein beverages”.

The definitions of “Product” and “Product Category”, together, suggests that the parties intended that a “clear” protein beverage was one that had the kind of clarity exhibited by the seven “products” specified in Sch 1.

Indeed, this was acknowledged by Proclear in that it contended that the beverages in the Product Category are clear, translucent, but not opaque “as exhibited by the flavours and colours of the beverages specified in schedule 1”.

I have compared Bodie’z products of the kind specified in Sch 1 of the Agreement with products manufactured by UBC allegedly in breach of cl 10.2.

Each is translucent. But the Bodie’z products are distinctly more so. The liquid in the Bodie’z products is not cloudy and it is possible, indeed easy, to read the writing on the other side of the bottle by looking through the liquid in the bottle.

A comparison of the protein water beverages manufactured by UBC for other parties, and the Bodie’z products referred to in Sch 1 of the Agreement, shows that they are quite different. Bodie’z products are brightly translucent. They are, on any view, “clear”. The allegedly contravening products are quite distinct and although also translucent, are cloudy in appearance.

Ultimately, the question is one of impression, but my conclusion is that the product manufactured by UBC for the third parties is not “clear” in the way that the liquid in the Bodie’z products is. I find this to be obvious at first glance at the products.

The parties’ competing contentions show that the expression “clear protein beverage” is ambiguous. Indeed, in Mr Alexis’s and Mr Michael’s opening written submissions, it was accepted that the expression was “somewhat ambiguous”. [53]

To the extent that this permits examination of evidence extrinsic to the Agreement, [54] Mr Gordon gave this evidence about a conversation he had with Mr Lazar in 2013:

Mr Lazar deposed that he had no recollection of Mr Gordon “ever adding a clouding agent when conducting testing on Bodie’z products” and denied having the above conversation.

However, Mr Lazar gave this evidence in cross-examination:

Thus, whether or not the conversation to which Mr Gordon deposed took place, Mr Lazar’s position was that he wanted the Bodie’z beverages to be “as clear as possible”.

Mr Lazar’s evidence that he wanted the Bodie’z beverages to be “as clear as possible” is available to assist in understanding what the parties meant when they used the expression “clear protein beverage”, and favours the construction contended for by UBC. It is not part of their negotiations leading to the making of the Agreement, as the Agreement was not yet in the contemplation of the parties. It is, however, an objective fact, known to both parties, when the Agreement was later created. It is, at least, consistent with my view as to what the Agreement means.

In closing submissions, Mr Alexis submitted that I should be hesitant to attribute to the parties a meaning to the expression “clear protein beverage” which would result in any question of breach being determined by fine distinctions based on subjective impressions of clarity.

But the commercial sense of UBC’s construction was illustrated by evidence that Mr Lazar gave in cross-examination.

In cross-examination, Mr Russell showed Mr Lazar bottles of Bodie’z products and bottles of the allegedly contravening products.

That led to this exchange between Mr Lazar and Mr Russell, and then with me:

This evidence is not admissible to show what the parties meant by the expression “clear protein beverage” in the Agreement. I do not take it into account in that way, particularly because Mr Lazar said it was not “something that came into the thought process at the time”.

But Mr Lazar’s readiness to identify the requisite degree of clarity by reference to an ability to “see the label on the back side of this product” is an answer to Mr Alexis’s submission set out at [237] above.

My conclusion is that the products manufactured by UBC for third parties are not “clear protein beverages”.

This aspect of Proclear’s claim fails.

Mr Russell contended the provisions of cl 10.8 of the Agreement constituted an unreasonable restraint of trade, particularly because:

I see substance in this contention but in view of my conclusions as to “clear protein beverage” I do not need to consider it further.

As with its case concerning confidential information, Proclear calculated its damages resulting from UBC’s and RJ8’s alleged breach of cl 10.8 by reference to loss of a chance for Proclear to sell Bodie’z products to customers who purchased allegedly contravening products.

Proclear contended that it would have made a net profit of $1.4975 for each bottle sold and thus, multiplying that figure by the number of allegedly contravening products sold, it lost a real or not negligible chance to earn $251,471.63. Proclear contended that the appropriate discount for that figure was, again, 40%, leaving a claim for damages of $150,882.17.

There was little dispute about these calculations.

In any event, it is not necessary that I form any final view about them.

From November 2017, Proclear began to become aware of and receive complaints from customers about what appeared to be mould in the Bodie’z products.

Thus:

On behalf of UBC, Mr Russell submitted that Proclear had not established that the problem with these bottles was in fact caused by mould. Because of other conclusions to which I have come, it is not necessary for me to resolve that question. Accordingly, I will refer to it as the “mould” issue.

There is a dispute as to what has caused the mould issue.

Proclear contends that the mould issue was caused by environmental factors, including by reason of the door of UBC’s Unanderra factory being left open during construction on an adjoining site.

UBC contends that the mould issue had been caused by spores in a Unique Ingredient supplied by Proclear, the Fonterra protein powder.

The Agreement contained no express term dealing with “mould”.

However, cl 14.5 of the Agreement provided:

Clause 14.5 limited UBC’s liability for “spoilage” of products, as long as they were manufactured, handled, and stored as set out in that clause.

Mr Alexis and Mr Michael submitted, and I accept, that this clause is not enlivened because the development of mould in Bodie’z products cannot be described as “spoilage”. The natural meaning of “spoilage”, in the context of cl 14.5, is the result of a product becoming unfit for use, rather than being inherently unfit for use by reason of some factor inherent in the product or its production.

Whether the mould was caused by an environmental issue at the factory, or because of spores in the Fonterra protein powder, it was caused by such an inherent factor.

Clause 14.5 is not engaged.

Critical to Proclear’s case concerning mould is its contention that there is to be implied into the Agreement the following term:

In closing submissions, Mr Alexis said that the alleged existence of this implied term is “at the heart of the case on mould”.

Indeed, it is.

If such a term were to be implied, and a breach established, it would not be necessary for Proclear to prove why the mould occurred. The onus would then be on UBC to prove that it was caused by spores in the Fonterra protein powder.

On the other hand, if no such term were to be implied, the onus would be on Proclear to prove the cause of the mould issue and to establish that this represented a breach by UBC of the Agreement.

Clause 22.1 of the Agreement provided:

This clause is not effective to contradict or preclude an implied term. [55]

In closing submissions, Mr Russell did not make a submission to the contrary.

Clause 22.2 of the Agreement provided:

That clause is not effective to exclude the implied term contended for by Proclear.

Proclear contends that the relevant term is implied as a matter of fact in the circumstances of this particular Agreement. [56]

Again, in closing submissions, Mr Russell did not make a submission to the contrary.

For a term to be implied in a contract as a matter of fact, it is necessary that the proposed term be:

UBC’s fundamental obligation under the Agreement was to manufacture the “Product” in accordance with the “Specifications” in cl 3.1. [58]

Proclear’s obligations included to provide the “Unique Ingredients”, including the Fonterra protein powder.

Thus, cl 4.1 of the Agreement provided:

Clause 6 of the Contract dealt with “Quality Control” and contained detailed provisions on that subject.

Clause 6.1 provided:

Clauses 6.6 to 6.9 contained the following detailed provisions:

In circumstances where the parties have made such detailed provision for “quality control”, it is hard to see why it would be necessary, as a matter of “business efficacy”, to imply into the Agreement the alleged term.

Further, as UBC’s obligation under the Agreement was to manufacture the “Product” in accordance with the “Specifications”, [59] and using the “Unique Ingredients” supplied by Proclear, [60] it is hard to see why, as a matter of fact, any term would be implied into the Agreement as to the fitness for purpose of the resultant Product; as opposed to the fitness for purpose of the manufacturing process adopted by UBC to produce that Product. Thus, it may be that a term might be implied similar to cl 14.5, [61] referring to an inherent issue with the product, such as mould, rather than “spoilage”.

However that may be, the question for me is whether the term posited by Proclear should be implied into the Agreement.

There is a fundamental problem with the posited term.

Its implication would have the effect that even if the mould was caused by spores in the Fonterra protein powder that Proclear provided as one of the Unique Ingredients and that UBC was obliged to use that powder to make Bodie’z products, UBC would be in breach of the implied term because the resultant product would:

That cannot be right. It would not be “reasonable and equitable”.

I took this up with Mr Alexis in closing submissions:

The difficulty with these submissions is encapsulated by the last words: “except to the extent that the mould has been caused by a unique ingredient that Proclear provided”.

The posited implied term admits of no such exception.

I reject the submission that there is an implied term in the Agreement of the kind for which Proclear contends.

There are two competing, irreconcilable, theories advanced as to what caused the mould, each articulated by a microbiologist, Mr Sofronios Eglezos for Proclear, and Associate Professor Bridge for UBC.

Mr Eglezos and Professor Bridge gave their evidence concurrently.

Mr Eglezos opined that the mould problem was likely caused by a factor associated with the factory environment. He did not attend the factory and did not perform any tests in support of his hypothesis.

As to the factory door, Mr Eglezos ultimately gave this evidence in response to a question from me, which arose out of questions earlier asked by Mr Russell:

His evidence continued:

Later, this exchange occurred:

Professor Bridge opined that, based on an analysis of one batch of Fonterra protein powder, the likely cause of the mould issue came from spores in that powder. Professor Bridge made observations, through a microscope, of the powder and procured that tests be conducted by two external laboratories. One conclusion from those tests was that there was a spore identified in the sample known as “aspergillus unguis”.

The parties have made detailed submissions about the nature of the testing that Professor Bridge caused to be conducted in relation to the Fonterra protein powder batch. Proclear offered a detailed critique of some of those techniques.

I do not find it necessary to deal with those matters because, ultimately, Professor Bridge accepted that he could only say that it was a possibility that the protein was the cause of the mould.

Thus, he gave this evidence:

Proclear pointed to a number of what it contended to be objective factors suggesting that Mr Eglezos’s hypothesis be accepted. These included that there appears to be lack of correlation between the incidence of mould and use by UBC of the Fonterra protein, as opposed to the other branded protein, that there appeared to be occurrence of mould in non-Bodie’z products manufactured by UBC, that there appeared to be issues concerning the cleanliness of UBC’s factory, that regulatory health auditors had advised UBC to close the factory doors, and that the fill chamber at the factory regularly opened during production.

On the other hand, UBC drew attention to the difference between the number of complaints it had received in relation to non-Bodie’z products and the volume of mould issues that appeared to have been manifest with Bodie’z products.

These are all factors to be weighed in the balance. But the fact is that each party adduced expert evidence to support their competing theories in circumstances where each expert agreed, ultimately, that he could not say with any certainty what caused the mould problem.

In these circumstances, I have no actual persuasion of the mind as to the likely cause of the mould

In any event, in final submissions, Proclear only pointed to one express term of the Agreement that UBC had allegedly contravened.

That was cl 6.3, which provided:

Proclear contended there was a breach by UBC of this clause:

Proclear pointed to a conversation between Mr Lazar’s brother, Mr Lachlan Lazar, and Mr Gordon, where Mr Gordon is alleged to have said:

Proclear contended that, as a result, it was put to the expense of inspecting bottles to reduce the risk of contaminated stock “going to market” and that it suffered loss of $150,650, being payments made to identified contractors.

Those submissions did not engage with UBC’s submissions about this subject.

UBC accepted that, in about March 2020, Mr Gordon and Mr Lazar reached an agreement to hand sort bottles of Proclear’s product and that, as Proclear submitted, such sorting occurred for about three weeks after production to allow any contamination to show.

On 26 March 2020, Ms Didi Bains, a business manager engaged by Proclear, wrote to Mr Gordon under the heading “Mould bottles - short term solution”.

Ms Bains referred to the “issue with mould in bottles” and recorded that “[w]e have been working on ways to limit this issue by checking bottles and removing those with mould which both your team and ours have done to assist”.

In June 2020, a dispute arose as to the terms of the agreement to hand sort bottles.

In that regard Ms Bains gave this evidence in cross-examination:

Mr Lazar gave evidence to the same effect:

Mr Alexis’s and Mr Michael’s submissions did not engage with this detail.

In those circumstances, I think Mr Russell was correct to submit that:

UBC contended that, in any event, the parties had reached an accord or settlement in relation to the mould issue in relation to identified production runs.

The settlement is said to arise inferentially from Mr Lazar’s alleged agreement that a production run between 12 and 14 May 2021 be carried out without an identified means of filtering. I cannot see how any agreement can be inferred from this.

The second agreement is said to relate to the production runs in August and September 2021.

Mr Gordon said that, on 19 August 2021, he had a conversation with Mr Lazar in which Mr Lazar agreed to waive any claims Proclear might have against UBC in relation to these runs.

Mr Lazar said that, in a conversation, Mr Gordon “said in effect that if Proclear did not provide a waiver UBC would not fulfil Proclear’s purchase orders by the agreed date.”

Following that conversation, Mr Lazar sent Mr Gordon an email:

Mr Gordon replied, confirming the production date and revised purchase order with adjusted volumes.

This represented an agreement in relation to these production runs.

Proclear abandoned the claim hitherto made that the agreement was reached as a result of economic duress or unconscionable conduct.

In view of my conclusions, it is not necessary for me to deal with the question of damages.

Proclear’s claim was for the loss it contended it suffered arising from waste of raw materials, warehousing, testing, and checking “unusable products”.

In final submissions, Mr Michael, who conducted this part of the case for Proclear, submitted that, assuming there had been a waiver in relation to the August and September 2021 production run, Proclear’s damages in this respect were $206,615.91.

Proclear alleges that UBC has overcharged it in relation to three Non-Unique Products: phosphoric acid, a stevia or sugar substitute known as Rebaudioside A, and a product known as Erythritol.

Clause 4.2 of the Agreement provided that:

This clause appeared in the Agreement immediately after cl 4.1, set out at [278] above, which obliged Proclear to provide all Unique Ingredients.

In that context, the “market” referred to in cl 4.2 must be the market concerning Non-Unique Ingredients in which the parties were operating, in which a co-pack manufacturer such as UBC would supply such products. The “competitive market price” referred to in that clause must in that context be a reference to the price at which a co-pack manufacturer competing with UBC would supply a Non-Unique Ingredient to Proclear.

Thus, cl 4.2 contained two promises. First, that UBC would provide the Non-Unique Ingredients at a price competitive to that which another co-pack manufacturer would supply such products to Proclear. Second, that UBC would provide such ingredients to Proclear at a cost no higher to Proclear than UBC provided to other of its customers.

The clause does not contain a promise that UBC would supply the Non-Unique Ingredients to Proclear at the same price that UBC acquired such ingredients from its wholesale supplier.

That is, the clause does not comprise a promise by UBC that it would supply Non-Unique Ingredients to UBC at the price that Proclear could obtain if it dealt directly with UBC’s suppliers.

There is nothing in this clause that would prevent UBC from applying a markup when supplying Non-Unique Ingredients. There is no reason to think, and there is nothing in the Agreement to suggest, that the parties intended UBC would supply Non-Unique Ingredients at cost.

It was always open to Proclear to source such ingredients itself. And it did.

Mr Lovric gave this evidence:

Thus, from the dates identified by Mr Lovric, Proclear sourced the three Non-Unique Ingredients of which complaint is made directly from the supplier.

Proclear claims the damages said to arise from the alleged breach by UBC of cl 4.2 as the difference between the cost to it of the supply by UBC of the three identified Non-Unique Ingredients and the “market rate” of those products, being prices quoted to UBC by the suppliers of those products.

But that price at which UBC acquired the products is not an integer relevant to UBC’s obligations under cl 4.2.

To establish a breach of cl 4.2, it would have been necessary for Proclear to show that other co-pack manufacturers were supplying their customers with the relevant ingredients at a price less than charged by UBC to Proclear, or that UBC was charging other of its customers less for the supply of those products.

Proclear has not established either of these matters. Proclear’s overcharging case fails.

Proclear alleges the existence of what it has described as a “Certification Agreement” made in a conversation with Mr Lazar and Mr Gordon in May 2019. [62]

Thus, in its List Statement, Proclear alleges:

That contention was repeated in closing submissions.

That contention is not borne out by the evidence relied on in those closing submissions.

In May 2018, a company associated with Mr Lazar, BL Research Pty Ltd, entered into a contract with ALDI Stores to supply a protein water product. It was a term of that agreement that:

In that context, in May 2019, Mr Gordon and Mr Lazar had this conversation:

On 2 and 3 May 2019, UBC manufactured a run of Bodie’z berry flavour products with ALDI’s “Maxade” branding. Mr Lazar did not dispute that he had this conversation with Mr Gordon prior to that run:

UBC manufactured that product on 2, 3, 6 and 7 May 2019.

In the meantime, on 2 May 2019, Mr Lazar wrote to Mr Gordon, stating that ALDI had requested that Proclear provide them with a “GFSI recognised certificate for the factory”, and stating that the HACCP approval that UBC’s factory had was not acceptable to ALDI.

Mr Lazar continued by saying that he understood that HACCP accreditation “makes up a major part of the GFSI Certificate, so I believe the majority of the work is done”.

It was in that context that the critical conversation, said to give rise to the Certification Agreement, took place.

Mr Lazar’s account of that conversation is as follows:

Immediately after setting out that conversation in his affidavit, Mr Lazar deposed:

In cross-examination, Mr Lazar confirmed that this was his understanding of what had taken place in the conversation.

Thus, on Mr Lazar’s own evidence, there was no Certification Agreement of the kind contended for in Proclear’s List Statement, or in Proclear’s closing written submissions.

The agreement was not to “do all things necessary” to achieve SQF certification but, rather, to “take all reasonable steps” to achieve that result.

There was no dispute about the following matters set out in Mr Russell’s closing submissions:

In August 2019, Mr Gordon and Mr Lazar had a further conversation, not disputed by Mr Lazar:

In September 2019, Mr Gordon met with Ms Bains.

There is a dispute about that conversation but, on Ms Bains’s account, it was as follows:

Ms Bains deposed that a short time later, on 11 October 2019, she had this conversation with Mr Gordon:

There the matter rested.

Mr Gordon heard no further about the SQF matter until Proclear’s solicitors sent a letter before action on 1 October 2021, two years later.

Based on this evidence, I see no basis to conclude that UBC was in breach of any “Certification Agreement”.

Such agreement as there was, as I have said, was not to “do all things necessary” to procure the SQF certification but, rather, to “take all reasonable steps” to do so.

In order to achieve this result, it would have been necessary for UBC to engage a full-time employee dedicated to quality assurance.

Proclear has not established that it was unreasonable of UBC to decline to take this step.

I see no basis in the evidence to justify the conclusion, advocated by Proclear in its closing submissions, that the “real reason” that UBC did not proceed with the SQF certification was to address criticisms made of UBC by the HACCP auditor.

Proclear claimed in relation to this matter damages of $57,147, being its costs incurred in relation to ALDI brand of stock that could not be sold.

That claim fails.

UBC claims an amount of $203,245 for unpaid invoices.

My conclusions have the effect that Proclear has no defence to that claim.

Proclear’s claim fails. It must be dismissed.

UBC is entitled to judgment in relation to its unpaid invoices.

Costs must follow the event.

The parties should confer and agree on the orders necessary to give effect to these reasons.