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NOTICE OF FILING

This document was lodged electronically in the FEDERAL COURT OF AUSTRALIA (FCA) on 16/10/2014 9:27:08 AM AEDT and has been accepted for filing under the Court’s Rules. Details of

filing follow and important additional information about these are set out below.

Details of Filing

Document Lodged: Statement of Claim - Form 17 - Rule 8.06(1)(a)

File Number: VID609/2014

File Title: ACCC v Coles Supermarkets Australia Pty Ltd

Registry: VICTORIA REGISTRY - FEDERAL COURT OF AUSTRALIA

Dated: 16/10/2014 10:46:41 AM AEDT Registrar

Important Information As required by the Court’s Rules, this Notice has been inserted as the first page of the document which

has been accepted for electronic filing. It is now taken to be part of that document for the purposes of the proceeding in the Court and contains important information for all parties to that proceeding. It must be included in the document served on each of those parties.

The date and time of lodgment also shown above are the date and time that the document was received by the Court. Under the Court’s Rules the date of filing of the document is the day it was lodged (if

that is a business day for the Registry which accepts it and the document was received by 4.30 pm local time at that Registry) or otherwise the next working day for that Registry.

Form 17

Rule 8.05(1 )(a)

FEDERAL COURT OF AUSTRALIA DISTRICT REGISTRY: VICTORIA DIVISION: GENERAL

STATEMENT OF CLAIM

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

Applicant

COLES SUPERMARKETS AUSTRALIA PTY LTD (ACN 004189 708) and other named in the Schedule Respondents

Filed on behalf of the Applicant, ACCC

Prepared by: Glenn Owbridge

Australian Government Solicitor.

Address for Service: Australian Government Solicitor, Level 11, 145 Ann St, Brisbane, OLD 4000 Glenn. Owbridge@ ags .gov .au

NOVID OF 2014

File ref: 14104731

Telephone: 07 3360 5654 Lawyer's Email:

[email protected] Facsimile: 07 3360 5795

OX 119 Brisbane

CONTENTS

Part 1: Background ................................................................................................................................. 3

Parties .................................................................................................................................................. 3

Coles business .................................................................................................................................... 4

PART II: Organisation of the Coles business ..................................................................................... 4

Grocery product categories ................................................................................................................. 4

PART Ill: Circumstances relevant to Coles' conduct and bargaining power .................................. 5

PART IV: Coles' conduct in relation to claims from individual suppliers ..................................... 14

Claims made against E. D. Oates Pty Ltd (ACN 004 329 462) ......................................................... 14

Purported Profit Gap Claim ............................................................................................................ 15

Unauthorised withholding and retention of money due to Oates ................................................... 18

Unconscionable conduct. ............................................................................................................... 23

Claims made against Austech Products Pty Ltd (ACN 064 573 413) .............................................. 25

Purported Profit Gap Claim ............................................................................................................ 26

Claim for retrospective waste payment ......................................................................................... 32

Refusing to end deferred deal ....................................................................................................... 35

Unconscionable conduct ................................................................................................................ 40

Claims made against Colonial Farm (Aust.) Pty Limited (ACN 006 376 754) .................................. .43

Claims for retrospective waste payment and requiring a 100% waste agreement ...................... .44


Claims made against Bayview Seafoods Pty Ltd (ACN 002 351 920) .............................................. 52

Requiring a 1 00°/o waste agreement ............................................................................................. 53

Penalty for late deliveries ............................................................................................................... 56

Unconscionable conduct ................................................................................................................ 61

Claims made against Benny's Confectionery Pty Ltd (ACN 114 669 626) ....................................... 63

Penalty for short deliveries ............................................................................................................ 63


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PART!: BACKGROUND

Parties

1. The Applicant (the ACCC) is:

1.1. a body corporate established pursuant to section 6A of the Competition and Consumer Act 2010 (Cth) (the Act); and

1.2. entitled to sue in its corporate name.

2. The First Respondent (Coles Supermarkets):

2.1. is and was at all material times a company incorporated in Australia;

2.2. is and was at all material times a corporation within the meaning of section 4 of the Act;

2.3. is and was at all material times a wholly owned subsidiary of Coles Group Limited (ACN 004 089 936) (Coles Group);

2.4. is and was at all material times a related body corporate of Coles Group within the meaning of section 4A of the Act;

2.5. is and was at all material times a related body corporate of the Second Respondent (GHPL) within the meaning of section 4A of the Act;

2.6. carries on, and at all material times carried on, business in trade or commerce as a supermarket retailer; and

2.7. supplies, and at all material times supplied, grocery products for retail sale to customers in Australia.

3. GHPL:

3.1. is and was at all material times a company incorporated in Australia;

3.2. is and was at all material times a corporation within the meaning of section 4 of the Act;

3.3. is and was at all material times a wholly owned subsidiary of Coles Group;

3.4. is and was at all material times a related body corporate of Coles Supermarkets within the meaning of section 4A of the Act;

3.5. is and was at all material times a related body corporate of Coles Group within the meaning of section 4A of the Act;

3.6. carries on, and at all material times carried on, business in trade or commerce as a supermarket wholesaler; and

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3.7. acquires, and at all material times acquired, grocery products from manufacturers and other suppliers (collectively Suppliers) for retail sale by Coles Supermarkets to customers in Australia.

Coles business

4. During the period from about December 2010 to about December 2011 (the relevant period), Coles Supermarkets and GHPL (together, Coles) engaged in a business of acquiring grocery products from Suppliers and selling those products to customers in Australia through Coles' retail stores (the Coles business).

5. During the relevant period:

5.1. GHPL acquired grocery products from Suppliers and distributed those grocery products to Coles Supermarkets for retail sale;

5.2. Coles Supermarkets sold the grocery products acquired by GHPL to customers in Australia through Coles' retail stores;

5.3. Suppliers negotiated the terms on which their grocery products were to be acquired, or to continue to be acquired, by Coles with representatives of either GHPL or Coles Supermarkets; and

5.4. Suppliers received orders for the acquisition of their grocery products from representatives of either GHPL or Coles Supermarkets.

PART II: ORGANISATION OF THE COLES BUSINESS

Grocery product categories

6. During the relevant period, the Coles business was structured by reference to groups of similar or related grocery products (General Categories).

7. Prior to about June 2011 in the relevant period, the General Categories included:

7.1. Non-Food;

7.2. Grocery and Food;

7.3. Deli, Dairy, Bakery & Frozen; and

7.4. Meat.

8. From about June 2011, the General Categories included:

8.1. General Merchandise and Apparel and Merchandise Support;

8.2. Fresh Produce and Bakery;

8.3. Grocery and Frozen; and

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8.4. Meat, Deli and Dairy.


9.1. each General Category was managed by a General Manager (GM);

9.2. each GM of a General Category reported to the Coles Merchandise Director (CMD);

9.3. within each General Category, the Coles business was managed by reference to smaller groups of similar or related grocery products (Business Categories);

9.4. each Business Category was managed by a Business Category Manager (BCM);

9.5. each BCM reported to a GM;

9.6. within each Business Category, the Coles business was managed by reference to smaller groups of similar or related products (Categories);

9.7. each Category was managed by a Category Manager (CM); and

9.8. each CM reported to a BCM.

10. During the relevant period, the CMD, GMs, BCMs and CMs acted on behalf of Coles in relation to the matters alleged below.

PART Ill: CIRCUMSTANCES RELEVANT TO COLES' CONDUCT AND BARGAINING POWER

11. During the relevant period, Coles:

11.1. operated retail stores in every Australian State and mainland Territory;

11.2. supplied approximately 30-35% of the grocery products supplied for retail sale to customers in Australia; and

11.3. together with Woolworths, supplied approximately 60-70% of the grocery products supplied for retail sale to customers in Australia.

12. During the relevant period, Coles acquired grocery products for retail sale from Suppliers pursuant to arrangements negotiated between Coles and the Supplier (Trading Arrangements).

13. Where Trading Arrangements were documented, the documentation could include one or more of the following documents produced by Coles:

13.1. a Trading Terms Letter;

13.2. a Consolidated Trading Terms Form (Trading Terms);

13.3. Standard Terms and Conditions.

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14. In the case of each of the Suppliers who are referred to below, the Trading Arrangements required that the Supplier pay Coles rebates, when Coles acquired the Supplier's grocery products, calculated as a percentage of the price Coles paid for the Supplier's products.

15. During the relevant period, representatives of Coles:

15.1. determined the number of units of each grocery product that Coles would acquire from a Supplier;

15.2. determined the frequency with which Coles would place orders for a grocery product with a Supplier;

15.3. determined the time frame within which Suppliers were required to deliver grocery products that had been ordered by Coles;

15.4. determined the price at which Coles would sell each grocery product acquired from a Supplier;

15.5. determined 'hurdle rates' for grocery products acquired from a Supplier, being a rate of retail sales the product was expected to achieve;

15.6. determined whether Coles would continue to acquire grocery products from a Supplier;

15.7. determined whether Coles would substitute grocery products it was acquiring from one Supplier with products acquired from another Supplier;

15.8. conducted, through its CMs, a 'range review' process at regular intervals, during which consideration was given to whether a Supplier's grocery products would be deleted from the range of products available for sale in Coles' retail stores;

15.9. determined the amount and location of shelf space in each of Coles' retail stores that would be allocated to grocery products acquired from a Supplier;

15.1 0. determined whether grocery products acquired from a Supplier would be the subject of promotion by Coles, for example by way of a markdown in the retail price, an entry in a Coles sales catalogue, or otherwise;

15.11. determined the timing, frequency, duration and financial terms of any promotions it decided to undertake for grocery products acquired from a Supplier, including the amount of any payment or other financial contribution Coles required a Supplier to make for the promotion; and

15.12. required any Supplier who wished to increase the price at which it sold any of its grocery products to Coles to make an application for approval of a price increase to Coles, which approval was at the discretion of Coles.

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16.1. Coles set profit targets for its General Categories and Business Categories;

16.2. Coles encouraged and/or required its CMs and BCMs to meet the profit targets referred to in paragraph 16.1, above, including by demanding payments from its Suppliers:

16.2.1. notwithstanding that Coles had no contractual entitlement to that payment;

16.2.2. regardless of whether Coles had, or genuinely believed it had, any legitimate basis for demanding that payment;

16.2.3. including by the practices alleged in paragraphs 17 to 19, below.

16.3. Coles set aside at least one day each calendar year, which was referred to within Coles as "Profit Day'' or "Perfect Profit Day", and set targets for Business Categories of money to be 'secured' by the Business Categories from Suppliers in accordance with the encouragement and/or requirement as alleged in paragraph 16.2 and including by the practices alleged in paragraphs 17 to 19, below.

PARTICULARS

(a) During the relevant period, "Profit Day" or "Perfect Profit Day" occurred on 15 December 2010 in Grocery and Food, 22 December 2010 in Deli, Dairy, Bakery & Frozen, and on 14 December 2011 in Grocery and Frozen;

(b) The best particulars that the ACCC can presently give of the encouragement and/or requirement alleged in paragraphs 16.2 and 16.3, above, are that it included the emails particularised in (c) to (1), below, and is to be inferred from the matters alleged in paragraphs 24 to 56, 68 to 122, 134 to 158, 166 to 193 and 203 to 222, below.

(c) On 1 August 2011 at 3:32pm, Philip Armstrong, the BCM of the Snacks and Beverages, also known as Impulse, Business Category (Impulse), sent an email to the CMs in Impulse setting out his 'expectation' that the CMs in Impulse would be 'challenging lines for profit' with Coles' Suppliers every week, and his 'expectation' that Impulse would achieve its profit each week, period and financial year end'.

(d) On 15 September 2011 at 12:16pm and 4:45pm, Philip Armstrong sent emails to the CMs in Impulse reiterating the need to meet the profit target for that week.

(e) On 15 September 2011 at 12:58pm, Steve Martin, a CM in Impulse, responded to the first of the two emails referred to in (d) above, and listed a number of actions for meeting profit targets, which included,

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relevantly, references to the types of practices alleged in paragraphs 17 to 19, below.

(f) On 5 October 2011 at 6.59am, Philip Reidy, the BCM of the Frozen Business Category (Frozen), sent an email to the CMs in Frozen, which relevantly stated that: ' ... our profit position still well behind budget we now need to be chasing all suppliers for any profit gaps we have to sales'.

(g) On 27 October 2011 at 6.51am, Philip Reidy sent an email to, among others, the CMs in Frozen, which relevantly attached a list of actions to get the profit in Frozen back to budget, including the types of practices alleged in paragraphs 17 to 19, below.

(h) On 8 November 2011 at 7.58am, Philip Armstrong, sent an email to the CMs in Impulse, which relevantly stated that: ' ... 1 want to get out of the Friday morning "panic" please. Our profit budget is a given .... Ring suppliers today if you are short on profit.'

(i) On 8 November 2011 at 7:35am, Anna Croft, the BCM of the Home-care Business Category (Homecare), sent an email to, among others, the CMs in Homecare, which contained a list of 'actions' for "[p]erfect profit day", which included, relevantly, references to the types of practices alleged in paragraphs 17 to 19, below.

(j) On 11 November 2011 at 3:32pm, Philip Reidy sent an email to, among others, the CMs in Frozen and Richard Pearson, the GM for the Grocery and Frozen General Category, which referred to Profit Day and relevantly stated that: 'We have been set a target of want money we need to secure as a team for the day, as this number is $750,000 which is just over $100,000 per category ... Let's aim to secure 1 million dollars for our profit day.' The email also provided suggestions for demanding money from Suppliers in 'areas that have delivered income', including, relevantly, by the types of practices alleged in paragraphs 17 to 19, below.

(k) The email particularised in U), above, was forwarded by others within Coles, including as follows:

(i) by Richard Pearson to the BCMs in the Grocery and Frozen General Category on 11 November 2011 at 5:04pm;

(ii) by Matthew Hankin, the BCM for the Breakfast and Condiments Business Category (Breakfast), to, among others, the CMs in Breakfast on 11 November 2011 at 10:24pm;

(iii) by Philip Armstrong, to, among others, the CMs in Impulse on 14 November 2011 at 6:48am, who also indicated that the target in Impulse for Profit Day was $2 million.

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(I) On 14 December 2011 at 7:52am, Philip Armstrong sent an email to, among others, the CMs in Impulse, which relevantly stated "Just a reminder today is perfect profit day, it is meant to be kept low key (we seem to have perfect profit day every day in Impulse!)".

(m) Further particulars may be provided after discovery.


17.1. Where Coles considered that it had not made as much profit as it wanted to make from sales of a Supplier's products, it referred to the difference between the profit it actually made on selling a Supplier's products and the profit it wanted to make on selling a Supplier's products as a "profit gap";

17.2. Coles knew that so-called "profit gaps" could be caused by Coles' own acts and omissions and by other matters which were largely or entirely outside the control of Suppliers;

17.3. Coles encouraged and/or required its CMs and BCMs to demand payments from Suppliers in order to make up purported "profit gaps", despite the fact that Coles:

17 .3.1. had, and knew that it had, no contractual or other lawful entitlement to the payments;

17.3.2. had not identified the cause of the purported "profit gaps" or had not identified the Supplier as the cause of the "profit gaps";

17.3.3. had no legitimate basis and, or alternatively, had no genuine or reasonable belief that there was a legitimate basis, for seeking the payments.

PARTICULARS

(a) The persons who had the knowledge attributed to Coles in paragraph 17.2 included Richard Pearson, Philip Armstrong, Anna Croft and Sue Campbell.

(b) The best particulars that the ACCC can presently give of the encouragement and/or requirement alleged in paragraph 17.3, above, are that it:

(i) included the emails particularised in (e), (f), (g), (i), (j) and (k) of the particulars to paragraph 16, above;

(ii) included the emails particularised in (c), (e) and (f), below;

(iii) is to be inferred from the matters particularised in (d) and (g), below;

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(iv) is to be inferred from the matters alleged in paragraphs 24 to 56 and 68 to 88, below;

(c) On 4 July 2011 at 1:30pm, Philip Armstrong, after seeking a payment from a Supplier for a purported "profit gap" based on a report that Coles had generated, sent an email to, among others, Mr Pearson and the BCMs in the Grocery and Frozen General Category describing the review of the report as resulting in a "pot of gold" and encouraging the use of the report to obtain payments for purported "profit gaps" from Suppliers.

(d) None of the recipients of Mr Armstrong's email particularised in (c), above, responded to say that the view conveyed by Mr Armstrong's email was unreasonable or inappropriate;

(e) On 23 August 2011 at 7:18am and on 12 September 2011 at 2:55pm, Anna Croft sent emails to, among others, the CMs in Homecare, instructing them to identify Suppliers with purported "profit gaps" and instructing them to obtain payments from those Suppliers on the basis of the purported "profit gaps" to achieve a 'target' of $770,000.

(f) On 7 August 2011 at 8:20pm, 12 September 2011 at 11 :44am, 12 September 2011 at 3:00pm and 28 November 2011 at 12:1 Opm, Matthew Hankin sent emails to, among others, the CMs in Breakfast, instructing them to identify Suppliers with purported "profit gaps" and instructing them to obtain payments from those Suppliers on the basis of the purported "profit gaps" as a way to achieve Coles' profit targets.

(g) Coles did not give written instructions to its BCMs or CMs that Coles should not demand money from Suppliers to make up purported "profit gaps" unless:

(i) the reason why a purported "profit gap" had arisen had been determined;

(ii) the Supplier was responsible for the purported "profit gap";

(iii) Coles' legitimate interests justified Coles seeking a payment from the Supplier for the purported "profit gap".

(h) Further particulars may be provided after discovery.


18.1. Coles recorded what purported to be the cost to it of:

18.1.1. products that Coles acquired from a Supplier that were lost, damaged or became unfit for sale while in Coles' retail stores (waste);

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18.1.2. Coles' employees or agents reducing, or marking down, the price in Coles' retail stores of products Coles acquired from a Supplier (markdowns);

18.2. Coles knew that waste and markdowns in respect of any particular product could be caused by its own act or omission rather than any act or omission by the Supplier of that product;

18.3. Coles encouraged and/or required its CMs and BCMs to demand payments from Suppliers on the premise that Coles had recorded waste or markdowns for the Supplier's products, despite the fact that Coles:

18.3.1. had, and knew that it had, no contractual or other lawful entitlement to the payments;

18.3.2. had not identified the causes of waste and markdowns or had not identified the Supplier as the cause of the waste and markdown;

18.3.3. had no legitimate basis and, or alternatively, had no genuine or reasonable belief that there was a legitimate basis, for seeking the payment.

PARTICULARS

(a) The persons who had the knowledge attributed to Coles in paragraph 18.2 included Richard Pearson and Sue Campbell.

(b) The best particulars that the ACCC can presently give of the encouragement and/or requirement alleged in paragraph 18.3, above, are that it:

(i) included the emails particularised in (e), (g), (i), (j) and (k)of the particulars to paragraph 16, above;

(ii) included the emails particularised in (c) to (f), below;

(iii) is to be inferred from the matter particularised in (g), below;

(iv) is to be inferred from the matters alleged in paragraphs 89 to 101, below;

(c) On 19 September 2011 at 9:05am, Philip Reidy sent an email to the CMs in Frozen attaching a "waste and markdown report" and instructing the CMs to use the report to obtain payments from Suppliers in relation to waste and markdowns to "bring us back in line with budget".

(d) On 13 December 2011 at 10:18 am, Aleksandra Drazic, a Coles employee, sent an email to the BCMs in the Grocery and Frozen General Category, which indicated that waste and markdowns could be an 'opportunity' for Perfect Profit Day and contained a link to be

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forwarded to CMs containing information to be used for waste and markdown claims on Profit Day.

(e) The email in (d), above, was forwarded by others within Coles, including as follows:

(i) by Anna Croft to the CMs in Homecare who reported to her on 13 December2011 at 10:21am;

(ii) by Philip Armstrong to the CMs in Impulse who reported to him on 13 December 2011 at 1 0:22am;

(iii) by Wayne Mcindoe, a CM in Breakfast, to the other CMs in Breakfast on 13 December 2011 at 1 0:45;

(iv) by Michael Phillips, a CM in Frozen, as part of a chain of emails, to the other CMs in Frozen and Philip Reidy, on 13 December 2011 at 1 0:58am.

(f) On 13 December 2011 at 9:51am, Rebecca Glover, a CM in Homecare, sent an email to Anna Croft and the other CMs in Homecare, containing a template to be sent to Suppliers to obtain payments from Suppliers in relation to waste and markdowns on Profit Day.

(g) Coles did not give written instructions to its BCMs or CMs that Coles should not demand money from Suppliers on the premise that Coles had recorded waste or markdowns for the Supplier's products unless:

(i) the causes of waste or markdowns had been identified;

(ii) the Supplier was responsible for the causes of the waste or markdowns.

(h) Further particulars may be provided after discovery.


19.1. Coles determined that it would impose 'punitive measures' or 'fines', in the form of monetary penalties, on Suppliers in some or all of the Business Categories in the Grocery and Frozen General Category, that Coles had recorded as not delivering the products that Coles ordered from them on time and in full in accordance with the order placed by Coles (late or short deliveries);

19.2. the monetary penalties referred to in paragraph 19.1 above were not calculated by reference to any assessment by Coles of the likely cost to Coles, if any, of the late or short delivery;

19.3. Coles encouraged and/or required its CMs and BCMs to demand payments from Suppliers for monetary penalties in relation to late or short deliveries, despite:

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19.3.1. the matter alleged in paragraph 19.2 above;

19.3.2. the fact that late or short deliveries may not lead to any loss to Coles;

19.3.3. the fact that Coles had, and knew that it had, no contractual or other lawful entitlement to the payments;

19.3.4. the fact that Coles had no legitimate basis and, or alternatively, had no genuine or reasonable belief that there was a legitimate basis, for imposing the 'punitive measures' or 'fines' referred to in paragraph 19.1 above.

PARTICULARS

(a) The best particulars that the ACCC can presently give of the encouragement and/or requirement alleged in paragraph 19.3, above, are that it:

(i) included the emails particularised in (e), (g), (i), (j) and (k) of the particulars to paragraph 16, above;

(ii) included the emails particularised in (b) to (d), below;

(iii) is to be inferred from the matter particularised in (e), below;

(iv) is to be inferred from the matters alleged in paragraphs 176 to 193 and 203 to 222, below;

(b) On 2 August 2011 at 11 :23am, Steve Martin sent the email referred to in paragraph 203, below;

(c) The email in (b), above, was forwarded by others within Coles, including as follows:

(i) by Richard Pearson to the BCMs in the Grocery and Frozen General Category on 2 August 2011 at 12:01 pm, who suggested that the BCMs send it to the CMs in their Business Categories;

(ii) by Philip Armstrong to the CMs in Impulse on 2 August 2011 at 12:03pm, who suggested that the CMs in Impulse send the same email to the Suppliers for whom they were responsible;

(iii) by Philip Reidy to the CMs in Frozen on 2 August 2011 at 1:08pm, who suggested that the CMs in Frozen send a similar email to the Suppliers for whom they were responsible;

(d) On 24 October 2011 at 9:50am and 8 November 2011 at 7:58am, Philip Armstrong sent emails to, among others, the CMs in Impulse

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encouraging the CMs to obtain payments from Suppliers for late or short deliveries as a way to achieve Coles' profit targets;

(e) Coles did not give written instructions to its BCMs or CMs that Coles should not demand money from Suppliers tor monetary penalties in relation to late or short deliveries unless:

(i) the Supplier was responsible tor the late or short delivery;

(ii) Coles had suffered a loss as a consequence of the late or short delivery and the amount of money demanded by Coles was reterrable to Coles' estimate of its loss as a consequence of the late or short delivery;

(f) Further particulars may be provided after discovery.

PART IV: COLES' CONDUCT IN RELATION TO CLAIMS FROM INDIVIDUAL SUPPLIERS

Claims made against E. D. Oates Pty Ltd (ACN 004 329 462)

20. During the relevant period, Coles acquired goods tor retail sale in Coles' retail stores from E.D. Oates Pty Ltd (ACN 004 329 462) (Oates).

21. For the financial year ending 30 June 2012:

21.1. Coles had annual revenue of $34.1 billion;

21.2. Oates had revenue of less than 0.25% of Coles' revenue for that period.


22.1. if Coles had ceased acquiring products from Oates:

22.1.1. it would have been very difficult for Oates to replace those sales with sales to other customers of a similar value or volume;

22.1.2. Coles could readily and fairly easily arrange supplies of substitute products in similar quantities from another Supplier, as Oates had at least one competitor capable of supplying such products to Coles;

22.2. if Coles ceased acquiring products from Oates it would have:

22.2.1. resulted in significant losses of economies of scale, revenue and profit for Oates;

22.2.2. significantly increased Oates' cost of goods that it sold;

22.2.3. reduced Oates' ability to offer competitive pricing to other retailers;

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22.3. Oates was concerned about the possibility that Coles could delete one or more of Oates' products.

PARTICULARS

One or more of Vanessa Stratos and David Birch had the state of mind attributed to Oates.

23. The Trading Arrangements between Oates and Coles during the relevant period were documented in:

23.1. a Trading Terms Letter, for the period 13 April 2009 to 26 June 2011; and

23.2. Trading Terms, for the period 27 June 2011 to, at least, January 2012.

Purported Profit Gap Claim

24. For the financial year ending 30 June 2011 (2011 financial year), the Trading Arrangements between Coles and Oates did not include a term that entitled Coles to payments for a purported "profit gap".

25. On or about 21 June 2011, at a meeting between representatives of Oates and representatives of Coles, Coles:

25.1. informed Oates to the effect that Coles had a purported profit gap of $326,590 on selling Oates' products in the 2011 financial year (Oates purported profit gap);

25.2. required a payment from Oates of $326,590 due to the Oates purported profit gap; and

25.3. did not provide Oates with:

25.3.1. details of the cause or causes of the Oates purported profit gap; or

25.3.2. information about how Coles had calculated the Oates purported profit gap.

PARTICULARS

(a) The meeting was attended by, inter alia, David Birch, Ross Miller and Vanessa Stratos, on behalf of Oates, and Anna Croft, on behalf of Coles, on or about 21 June 2011.

(b) Anna Croft made the statements on behalf of Coles alleged in paragraphs 25.1 and 25.2, above.

26. On 21 June 2011, Coles, by email to Oates, amongst other things:

26.1. confirmed the requirement that Oates make a payment of $326,590 for the Oates purported profit gap;

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26.2. sought that Oates confirm by "first thing" the following morning that it would make the payment referred to in 26.1, above.

PARTICULARS

The email was sent by Anna Croft, on behalf of Coles, to Ross Miller, Vanessa Stratos and David Birch on behalf of Oates, and copied to Angela Clarkson of Coles, on 21 June 2011 at 5:56 pm.

27. Coles considered it had the Oates purported profit gap alleged in paragraph 25.1, above, because:

27.1. it had determined that it wanted its profit on selling Oates' products to have grown by the same percentage as the growth in the cost to Coles of acquiring Oates' products, when compared with the previous financial year;

27.2. it had not achieved the profit that it wanted.

PARTICULARS

(a) Anna Croft had the state of mind attributed to Coles.

(b) That Anna Croft had the state of mind is to be inferred from the emails particularised to paragraphs 26, above, and 34, below.

28. Coles had not identified the cause of the Oates purported profit gap before it engaged in the conduct alleged in paragraphs 25 and 26, above.

29. A substantial cause of the Oates purported profit gap were actions taken by Coles during the 2011 financial year, without the agreement of Oates, to conduct a promotion on Oates' products by selling those products at a price below Coles' cost.

30. At no time did Coles identify any conduct or omission by Oates that had resulted in the Oates purported profit gap.

31. At no time did Coles have a reasonable basis to believe that it was entitled to seek the payment from Oates for the Oates purported profit gap because of the matters alleged in paragraphs 17.2, 24, 28, 29 and 30, above.

32. On 22 June 2011, by email, Oates informed Coles that it would not make a payment of $326,590, because, among other things:

32.1. making the payment of $326,590 to Coles would mean paying to Coles a very significant proportion of the earnings before interest and tax that Oates would otherwise have made on sales to Coles for the 2011 financial year;

32.2. the price to Coles of Oates' products had remained unchanged for 2 years and Oates had absorbed increased costs in raw materials throughout this time, without increasing the prices it charged to Coles;

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32.3. the actions of Coles alleged in paragraph 29, above, had, by Oates' estimate, eroded over $200,000 of Coles' profit.

PARTICULARS

(a) The email was sent by Ross Miller, on behalf of Oates, to Anna Croft, on behalf of Coles, copied to David Birch of Oates, on 22 June 2011 at 11:58 am.

(b) Particulars of the proportion identified in the email and referred to in paragraph 32.1 are confidential and will be delivered separately.

33. On 23 June 2011, Oates, by email to Coles, made a request that Coles provide Oates with detail as to how Coles had arrived at the amount of $326,590 as the Oates purported profit gap.

PARTICULARS

The email was sent by David Birch, on behalf of Oates, to Anna Croft, on behalf of Coles, copied to Ross Miller and Vanessa Stratos of Oates, on 23 June 2011 at 5:57 pm.

34. On 24 June 2011, Coles, by email to Oates:

34.1. informed Oates that Coles:

34.1.1. expected that Coles' profit would grow in line with any growth in the net cost to Coles of Oates' products;

34.1.2. was not prepared to work collaboratively with Oates for the next year if Oates did not rectify the Oates purported profit gap; and

34.1.3. Coles' net profit on the sale of Oates' products needed to improve by $326,909;

34.2. provided the figures for the percentage growth in Coles' sales growth, Coles' net profit and the net cost to Coles of acquiring Oates' products in the 2011 financial year compared with the preceding financial year; and

34.3. sought a response from Oates in relation to this issue on the same day.

PARTICULARS

The email was sent by Anna Croft, on behalf of Coles, to David Birch, on behalf of Oates, copied to Ross Miller and Vanessa Stratos of Oates, and Angela Clarkson of Coles, on 24 June 2011 at 11:07 am.

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35. On 24 June 2011, Oates replied to the email referred to in paragraph 34 above, and, amongst other things, informed Coles that:

35.1. the figures referred to in paragraph 34.2 above, were not sufficient;

35.2. Oates required greater detail from Coles as to the Oates purported profit gap.

PARTICULARS

The email was sent by David Birch, on behalf of Oates, to Anna Croft, on behalf of Coles, copied to Ross Miller and Vanessa Stratos of Oates, and Angela Clarkson of Coles, on 24 June 2011 at 2:15pm.

36. Coles did not provide Oates with the details of:

36.1. how the figures used to determine the Oates purported profit gap of $326,590 were calculated;

36.2. the cause or causes of the Oates purported profit gap; or

36.3. any basis tor any entitlement on the part of Coles to payment from Oates tor the Oates purported profit gap.

Unauthorised withholding and retention of money due to Oates

37. On 24 June 2011, Oates, by email to Coles, informed Coles that:

37.1. Oates could not identify any cause of the Oates purported profit gap tor which it was responsible; and

37.2. given the importance of its relationship with Coles, Oates offered to provide Coles with:

37.2.1. a cash payment of $50,000, referred to as "straight monies"; and

37.2.2. discounts on the price of products Coles acquired from Oates in June and July 2011 to the total value of $17 4,000.

PARTICULARS

The email was sent by Ross Miller, on behalf of Oates, to Anna Croft, on behalf of Coles, copied to David Birch and Vanessa Stratos of Oates, on 24 June 2011 at 4:03 pm.

38. On 8 July 2011, Coles, by email to Oates, informed Oates that Coles agreed to Oates' proposal alleged in paragraph 37.2 above, except that Coles would that day raise a claim tor a cash payment, referred to as a "straight claim", of $224,000 (exclusive of GST).

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PARTICULARS

The email was sent by Anna Croft, on behalf of Coles, to Ross Miller, on behalf of Oates, copied to Vanessa Stratos of Oates and Joey Yeung of Coles, on 8 July 2011 at 10:53 am.

39. On 8 July 2011, Coles internally raised and processed a claim for $246,400 (inclusive of GST} against Oates, with the consequence that Coles would deduct $246,400 from the next payment due from Coles to Oates for products acquired by Coles from Oates.

40. Coles did not have Oates' authority or agreement to the raising or processing of a claim for $246,400 (inclusive of GST) against Oates when it undertook the conduct alleged in paragraph 39, above.

41. On 11 July 2011, Oates, by email to Coles:

41.1. informed Coles that a claim for the immediate payment of $224,000 (exclusive of GST) to Coles was unacceptable to Oates; and

41.2. offered to provide Coles with payments totalling $224,000 over six weeks, comprised of:

41.2.1. discounts on the price of products Coles acquired from Oates in July and August 2011 to the total value of $174,000; and

41.2.2. a payment of $50,000, which could be claimed by Coles immediately upon acceptance of the discounts that had been offered.

PARTICULARS

The email was sent by Vanessa Stratos, on behalf of Oates, to Anna Croft, on behalf of Coles, copied to Ross Miller of Oates and Angela Clarkson of Coles, on 11 July 2011 at 3:25 pm.

42. On or about 14 July 2011, without the authority or agreement of Oates, Coles deducted the amount of $246,400 (inclusive of GST) from a payment due from Coles to Oates.

43. On 21 July 2011, Oates, by email to Coles, referred to the deduction alleged in paragraph 42 above, and informed Coles that:

43.1. the deduction had not been authorised, or agreed to, by Oates;

43.2. the claim for $246,400 had been rejected; and

43.3. the deduction needed to be reversed by Coles as a matter of urgency.

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PARTICULARS

The email was sent by Ross Miller, on behalf of Oates, to Anna Croft, on behalf of Coles, copied to David Birch, Les Buyers and Vanessa Stratos of Oates and Angela Clarkson of Coles, on 21 July 2011 at 11:31 am.

44. On 25 July 2011, Oates, by email to Coles, reiterated that it wanted the unauthorised deduction of $246,400 by Coles to be reversed.

PARTICULARS

The email was sent by Ross Miller, on behalf of Oates, to Anna Croft, on behalf of Coles, copied to David Birch of Oates, on 25 July 2011 at 1 :36 pm.

45. On 29 July 2011, Oates, by email to Coles, informed Coles that, amongst other things:

45.1 . there was an urgent need to resolve the unauthorised retention of money due to Oates by Coles;

45.2. Coles could not withhold money due to Oates without agreement from Oates; and

45.3. Coles had not provided any substantiating detail for the claim in respect of the Oates purported profit gap.

PARTICULARS

The email was sent by David Birch, on behalf of Oates, to Anna Croft, on behalf of Coles, copied to Ross Miller of Oates, on 29 July 2011 at 2:29pm.

46. On 29 July 2011, Coles, by email to Oates, agreed that there was a need to resolve the issue referred to in Oates' email alleged in paragraph 45 above, so that Coles and Oates could continue their commercial relationship.

PARTICULARS

The email was sent by Anna Croft, on behalf of Coles, to David Birch, on behalf of Oates, copied to Ross Miller of Oates, on 29 July 2011 at 5:03 pm.

47. On 9 August 2011, Oates, by email to Coles, provided Coles with three proposals for resolving Coles' unauthorised retention of the $246,400, including:

47.1. two proposals of a similar nature to the proposals alleged in paragraphs 37.2 and 41.2 above, both of which involved the immediate payment by Coles to Oates of the $246,400; and

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47.2. a third proposal, which involved Coles retaining the $246,400 if Coles agreed to acquire certain product lines from Oates on the terms outlined in the email.

PARTICULARS

The email was sent by Vanessa Stratos, on behalf of Oates, to Anna Croft, on behalf of Coles, copied to David Birch and Ross Miller of Oates, and Angela Clarkson of Coles, on 9 August 2011 at 1 :35 pm.

48. By on or about 12 August 2011, Coles:

48.1. had reviewed the circumstances in which it came to engage in the conduct alleged in paragraph 42 above;

48.2. having reviewed the matter, it had decided that the $246,400 that it had withheld from money due to Oates on or about 14 July 2011 was an unauthorised deduction; and

48.3. determined that instead of paying the $246,400 that was due to Oates in one lump sum, Coles would pay the amount over time by deducting it from monies that became due to Coles from Oates from time to time.

PARTICULARS

Leslie Sargent conducted the review on behalf of Coles and made the decisions attributed to Coles.

49. On 17 August 2011, Oates sought to resolve the unauthorised withholding by Coles of the $246,400 due to Oates, by providing an offer to Coles in similar terms to the proposal alleged in paragraph 47.2 above.

PARTICULARS

The offer was contained in a letter from Vanessa Stratos, on behalf of Oates, to Les Sargent, on behalf of Coles, dated 17 August 2011.

50. In or around October 2011, Coles sought from Oates, and asked Oates to confirm that it would pay, an ongoing rebate to Coles in relation to Coles' Active Retail Collaboration (ARC) program (ARC rebate).

PARTICULARS

Coles sought the ARC rebate, and asked Oates to confirm that it would pay the ARC rebate, by, among other things, an email from Les Sargent, on behalf of Coles, to Vanessa Stratos, on behalf of Oates, on 17 October 2011 at 11 :26am.

51. On 24 October 2011, Oates, by email to Coles, informed Coles that, amongst other things, it would not agree to the ARC rebate referred to in paragraph 50 above, and

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noted that there was still no official resolution to the unauthorised withholding by Coles of the $246,400 due to Oates.

PARTICULARS

The email was sent by Ross Miller, on behalf of Oates, to Les Sargent and Anna Croft, on behalf of Coles, copied to David Birch of Oates, on 24 October 2011 at 11 :35 am.

52. On or about 25 October 2011, at a meeting between representatives of Oates and Coles, Coles reiterated its request for the ARC rebate referred to in paragraph 50 above and offered to pay the $246,000 which it had withheld from Oates, without the authority or agreement of Oates.

PARTICULARS

The meeting was attended by, inter alia, Ross Miller, on behalf of Oates, and Les Sargent, on behalf of Coles, on or about 25 October 2011.

53. On 25 October 2011, Oates, by email to Coles, relevantly informed Coles that:

53.1. if Coles agreed to the third proposal made in the email referred to in paragraph 47 above, Coles could retain the money it had withheld;

53.2. if Coles did not agree to the third proposal contained in the email referred to in paragraph 47 above, Oates wanted to be paid the money that Coles had withheld.

PARTICULARS

The email was sent by Ross Miller, on behalf of Oates, to Anna Croft and Les Sargent, on behalf of Coles, copied to David Birch of Oates, on 25 October 2011 at 5:02pm.

54. On 27 October 2011, Coles, by email to Oates, informed Oates that, amongst other things:

54.1. Coles would pay Oates the $246,000;

54.2. referring to a range review, Coles would endeavour to maintain a strong transactional relationship and honour its commitments, but it had concerns that Oates' supply may be adversely affected by it not agreeing to pay Coles the ARC rebate.

PARTICULARS

The email was sent by Les Sargent, on behalf of Coles, to Ross Miller, on behalf of Oates, and Anna Croft, on behalf of Coles, copied to David Birch of Oates, on 27 October 2011 at 1:32pm.

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55. On or about 18 November 2011, at a meeting between representatives of Oates and Coles, Oates offered to make monthly payments of $41,500 (exclusive of GST) to Coles during the period November 2011 to July 2012, to the total of $365,200 (inclusive of GST), which was comprised of:

55.1. $70,000, representing a lump sum equivalent to the ARC rebate;

55.2. $295,200, representing a sum to address the Oates purported profit gap and paid in exchange for Coles providing Oates with a number of catalogue spots and product trials.

PARTICULARS

The meeting was attended by Ross Miller, on behalf of Oates, and Les Sargent, on behalf of Coles, on or about 18 November 2011.

56. Coles accepted Oates' offer, alleged in paragraph 55 above, on or around 18 November 2011.

PARTICULARS

(a) Coles' acceptance of Oates' offer was communicated either:

(i) orally, at the meeting between representatives of Coles and representatives of Oates on or about 18 November 2011, referred to in paragraph 55; or

(ii) orally or in writing, after the meeting on 18 November 2011 but before 20 February 2012.

(b) Further particulars may be provided after discovery.

57. On 3 January 2012, Coles returned the $246,400 to Oates.

Unconscionable conduct

58. In its dealings with Oates alleged above, Coles was in a substantially stronger bargaining position relative to Oates:

58.1. because of the matters alleged in paragraphs 11, 15, 21 and 22, above;

58.2. which is further to be inferred from the fact that Coles engaged, and considered itself able to engage, and was in fact able to engage, in the conduct alleged in paragraphs 25 to 54, above;

59. The conduct of Coles alleged in paragraphs 25 to 36, above, of demanding a payment in respect of the Oates purported profit gap, was unconscionable, in contravention of section 22 of Schedule 2 of the Act as in force during the relevant period after 1 January 2011 (the Australian Consumer Law), in all of the circumstances, including that:

Page 23

59.1. Coles was in a substantially stronger bargaining position relative to Oates, as alleged in paragraph 58, above;

59.2. Coles knew, or ought reasonably to have known, that it had no legitimate basis for demanding a payment from Oates in respect of the Oates purported profit gap, having regard to the matters alleged in paragraphs 17.2, 24, 28, 29 and 30, above;

59.3. Coles failed to disclose details about the Oates purported profit gap to Oates so as to enable Oates to understand the basis upon which the demand was made, how the payment was calculated and how the purported profit gap was caused, despite several requests for such information, as alleged in paragraphs 33 and 35, above;

59.4. Coles applied undue pressure to Oates by:

59.4.1. making the explicit threat alleged in paragraph 34.1.2 above that Coles would take measures that were commercially detrimental to Oates if Oates did not agree to make a payment in respect of the Oates purported profit gap; and

59.4.2. pressing Oates for an urgent response to Coles' requests for the payment as alleged in paragraphs 26.2 and 34.3, above.

59.5. the conduct was consistent with the encouragement and/or requirement of Coles, as alleged in paragraphs 16 and 17, above;

59.6. Coles took advantage of its substantially stronger bargaining position relative to Oates by demanding payment in respect of the Oates purported profit gap, pressing the claim without disclosing details about the Oates purported profit gap and making the explicit threat of Coles taking commercially detrimental measures against Oates.

60. The conduct of Coles alleged in paragraphs 37 to 54 above, of unlawfully withholding money due to Oates, was unconscionable in contravention of section 22 of the Australian Consumer Law in all of the circumstances, including:

60.1. Coles was in a substantially stronger bargaining position relative to Oates, as alleged in paragraph 58 above;

60.2. Coles failed to disclose details about the Oates purported profit gap to Oates so as to enable Oates to understand the basis upon which the demand was made, how the payment was calculated and how the purported profit gap was caused, despite several requests for such information as alleged in paragraphs 33 and 35, above;

60.3. Coles applied undue pressure to Oates by making the implicit threat alleged in paragraph 46 above;

Page 24

60.4. the circumstances in relation to the demand for payment in respect of the Oates purported profit gap, as alleged in paragraph 59, above;

60.5. Coles had no lawful entitlement to withhold the money;

60.6. Coles knew or ought to have known that it had no lawful entitlement to retain the money having regard to the matters alleged in paragraph 48 above, as well as the matters alleged in paragraphs 24, 29, 30 32, 36.3, 37, 41, 43, 44, 45, 51 and 53, above;

60.7. while refusing to repay the money to Oates that it knew it had no lawful entitlement to retain, Coles sought Oates' agreement to make ongoing payments of the ARC rebate to Coles and made the implicit threat alleged in paragraph 54.2 to attempt to obtain Oates' agreement to pay the ARC rebate;

60.8. Coles took advantage of its substantially stronger bargaining position relative to Oates by withholding and retaining the money without lawful entitlement and where it knew or ought to have known it had no lawful entitlement to withhold the money.

61. Further or in the alternative to paragraphs 59 and 60 above, by engaging in the conduct alleged in paragraphs 25 to 54 above of asserting an entitlement to a payment and unlawfully withholding and retaining money due to Oates was unconscionable in contravention of section 22 of the Australian Consumer Law in all the circumstances alleged in paragraphs 59 to 60 above.

Claims made against Austech Products Pty Ltd (ACN 064 573 413)

62. During the relevant period, Coles acquired goods for retail sale in Coles' retail stores from Austech Products Pty Ltd (ACN 064 573 413) (Austech).

63. The goods referred to in paragraph 62 above included household, laundry, cosmetic and toiletry products.



64.2. Austech had revenue that was less than 0.25% of Coles' revenue for that year.


65.1. if Coles had ceased acquiring products from Austech:

65.1.1. it would have been very difficult or impossible for Austech to replace those sales with sales to other customers of a similar value or volume;

65.1.2. Coles could readily and fairly easily arrange supplies of substitute products in similar quantities from another Supplier;

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65.2. if Coles ceased acquiring products from Austech it would have:

65.2.1. resulted in significant losses of economies of scale, revenue and profit for Austech;

65.2.2. significantly increased Austech's cost of goods that it sold;

65.2.3. reduced Austech's margins;

65.3. Austech was concerned about the possibility that Coles could delete one or more of Austech's products.

PARTICULARS

Andrew Chaney had the state of mind attributed to Austech.

66. During the relevant period, Austech retained Super-marketers Sales Brokers Pty Ltd (SSB) as its agent in relation to negotiations with Coles in respect of the Trading Arrangements between Austech and Coles.

67. The Trading Arrangements between Austech and Coles during the relevant period were documented in:

67.1. terms and condition of purchase, for the period from August 2004 to an unknown date;

67.2. Trading Terms signed by Austech on or about 20 October 2011, for the period 20 October 2011 to 20 October 2012; and

67.3. amended Trading Terms signed by Austech on or after 11 November 2011 that replaced the Trading Terms referred to in paragraph 67.2 for the period 20 October 2011 to 20 October 2012.

Purported Profit Gap Claim

68. For the 2011 financial year, the Trading Arrangements between Coles and Austech did not include a term that entitled Coles to payments for purported "profit gaps".

69. On 7 December 2010, Coles, by email to Austech:

69.1. informed Austech that Coles had a purported profit gap of $25,845 on selling Austech's products in the first five months of the 2011 Financial Year (the first Austech purported profit gap);

69.2. made a request that Austech advise what payment of $25,845 it would make to Coles to remove the first Austech purported profit gap within three days;

69.3. did not provide Austech with details of the cause or causes of the first Austech purported profit gap.

Page 26

PARTICULARS

The email was sent by Angela Clarkson, on behalf of Coles, to Richard Crettenden of SSB, on behalf of Austech, copied to Andrew Chaney of Austech, on 7 December 2010 at 5:52pm.

70. Coles considered it had the first Austech purported profit gap alleged in paragraph 69.1, above, because:

70.1. it had determined that it wanted its profit on selling Austech's products to have grown by the same percentage as the growth in the cost to Coles of acquiring Austech's products, when compared with the previous financial year;

70.2. it had not achieved the profit it wanted.

PARTICULARS

(a) Angela Clarkson had the state of mind attributed to Coles.

(b) That Angela Clarkson had the state of mind is to be inferred from the content of the email particularised in paragraph 69 above.

71. Coles had not identified the cause of the first Austech purported profit gap before it engaged in the conduct alleged in paragraph 69 above.

72. At no time did Coles identify any conduct or omission by Austech that had resulted in the first Austech purported profit gap.

73. At no time did Coles have a reasonable basis to believe that it was entitled to seek the payment from Austech for the first Austech purported profit gap because of the matters alleged in paragraphs 17.2, 68, 71 and 72 above.

7 4. On 10 December 2010, Austech, by email to Coles, informed Coles that:

74.1. it was mystified as to why the first Austech purported profit gap had arisen;

7 4.2. over the preceding two years Coles had increased the retail price of Austech's products, even though Austech had not increased the prices it charged Coles for those products;

7 4.3. Austech would like a more detailed report showing each of Austech's lines individually because the first Austech purported profit gap might relate to a product branded as Actizyme;

7 4.4. the Actizyme line had been purchased by Austech in March 2010.

PARTICULARS

The email was sent by Andrew Chaney, on behalf of Austech, to Angela Clarkson, on behalf of Coles, copied to lain Chaney, of Austech and

Page 27

Richard Crettenden of SSB, on behalf of Austech, on 10 December 2010 at 9:56 am.

75. On 13 December 2010, Coles, by email to Austech:

75.1. informed Austech that Coles could not provide Austech with the information sought by Austech alleged in paragraph 74.3 above;

75.2. recommended that Austech review its own records to determine the cause of the first Austech purported profit gap; and

75.3. indicated that it was urgent that Austech make a payment in respect of the first Austech purported profit gap.

PARTICULARS

The email was sent by Angela Clarkson, on behalf of Coles, to Andrew Chaney, on behalf of Austech, copied to lain Chaney of Austech, Joey Yeung of Coles, and Richard Crettenden of SSB, on behalf of Austech, on 13 December 2010 at 3:09 pm.

76. On 13 December 2010, Austech, by email to Coles, informed Coles that:

76.1. Austech could not identify any cause of the first Austech purported profit gap for which Austech was responsible;

76.2. Austech believed the first Austech purported profit gap must have been caused by an issue with Actizyme;

76.3. Actizyme had only been transferred to Austech's account with Coles in March 2010;

76.4. Austech had no way of knowing what promotions Coles had undertaken, or margins Coles was receiving, on Actizyme in the preceding year;

76.5. Austech would like Coles to investigate the Actizyme line to confirm that it was the cause of the first Austech purported profit gap; and

76.6. Austech may be willing to offer to pay something in relation to the first Austech purported profit gap.

PARTICULARS

The email was sent by Andrew Chaney, on behalf of Austech, to Angela Clarkson, on behalf of Coles, copied to lain Chaney of Austech and Richard Crettenden of SSB, on behalf of Austech, on 13 December 2010 at 3:55 pm.

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77. On 17 December 2010, Austech, by email to Coles, stated that:

77.1. it had not received a reply from Coles to the email particularised in paragraph 76 above;

77.2. Austech would like to find out whether the first Austech purported profit gap was caused by Actizyme;

77.3. Austech understood that Coles wanted a resolution sooner rather than later;

77.4. to secure the Actizyme line in the short term, Coles was given authority to raise a claim for the amount of the first Austech purported profit gap sought by Coles.

PARTICULARS

The email was sent by Andrew Chaney, on behalf of Austech, to Angela Clarkson, on behalf of Coles, copied to lain Chaney of Austech and Richard Crettenden of SSB, on behalf of Austech, on 17 December 2010 at 10:17 am.

78. On 22 June 2011, Coles, by email to Austech, informed Austech that:

78.1 . Coles had, by oversight, not withheld the money that Austech had agreed to pay to Coles in relation to the first Austech purported profit gap;

78.2. Coles would process the claim for the first Austech purported profit gap that week so as to withhold $25,845 from money due to Austech;

78.3. the first Austech purported profit gap was caused by the Actizyme product;

78.4. Coles' profits on selling Actizyme in the periods from 1 April 2010 to 30 June 2010 and 6 December 2010 to 11 April 2011 were $15,516.74 less than Coles wanted them to have been (the second Austech purported profit gap);

78.5. the second Austech purported profit gap had arisen because the cost to Coles of acquiring Actizyme was $0.62 more expensive per unit than it had been before 1 April 201 0;

78.6. Coles wanted Austech to review and confirm that it would make a payment to Coles of $15,516.7 4 in respect of the second Austech purported profit gap; and

78.7. Coles wanted Austech to agree to make the payment alleged in paragraph 78.6 by midday of the following day.

PARTICULARS

The email was sent by Angela Clarkson, on behalf of Coles, to Andrew Chaney and lain Chaney, on behalf of Austech, and Richard Crettenden of SSB, on behalf of Austech, copied to Joey Yeung of Coles, on 22 June 2011 at 5:1Opm.

Page 29

79. At no time did Coles identify any conduct or omission by Austech that had resulted in the second Austech purported profit gap.

80. Coles knew that the second Austech purported profit gap had arisen because the effect of an agreement that Coles had made at some earlier time with the previous owner of Actizyme was that the cost to Coles per unit of Actizyme was greater after 1 April 2010 than it was before 1 April 2010.

PARTICULARS

(a) Angela Clarkson had the knowledge attributable to Coles;

(b) That Ms Clarkson knew these matters is to be inferred from the following:

(i) the contents of a spreadsheet attached to Ms Clarkson's email particularised in paragraph 78, above;

(ii) a Supplier could not increase the price that it charged Coles for its products without the agreement of Coles.

81. At no time did Coles have a reasonable basis to believe that it was entitled to seek a payment from Austech for the second Austech purported profit gap because of the matters alleged in paragraphs 17.2, 68, 76.2 to 76.4, 78.5, 79 and 80 above.

82. On 23 June 2011, Austech, by email to Coles, stated to Coles that:

82.1. Austech had matched the price to Coles for Actizyme that was being charged by the previous owner of Actizyme;

82.2. Austech had still not received the detailed information it had sought in relation to the first Austech purported profit gap, alleged in paragraph 74.3 above;

82.3. there had been no other price increases from Austech to Coles for more than 3 years.

PARTICULARS

The email was sent by Andrew Chaney, on behalf of Austech, to Angela Clarkson, on behalf of Coles, lain Chaney of Austech and Richard Crettenden of SSB, on behalf of Austech, copied to Joey Yeung of Coles, on 23 June 2011 at 11:26 am.

83. On 23 June 2011, Coles, by email to Austech, in effect:

83.1. reiterated its demand upon Austech for a payment for the amount of the first Austech purported profit gap;

83.2. continued to ignore Austech's requests for the information alleged in paragraph 82.2 above;

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83.3. informed Austech that Coles had identified a net purported profit gap of $168,186 on selling Austech's products in the 2011 Financial Year (the Austech net purported profit gap);

83.4. inquired as to whether Austech would prefer that Coles raise one claim of $168,186 in relation to the Austech net purported profit gap; and

83.5. asked Austech to confirm that same day that it agreed to make payments for the first Austech purported profit gap and the second Austech purported profit gap.

PARTICULARS

The email was sent by Angela Clarkson, on behalf of Coles, to Andrew Chaney and lain Chaney, on behalf of Austech, and Richard Crettenden of SSB, on behalf of Austech, copied to Joey Yeung of Coles, on 23 June 2011 at 11 :45am.

84. At no time did Coles identify any conduct or omission by Austech that had resulted in the Austech net purported profit gap.

85. At no time did Coles have a reasonable basis to believe that it was entitled to seek the payment from Austech for the Austech net purported profit gap because of the matters alleged in paragraphs 17.2, 68, 76.2 to 76.4, 78.5 and 84 above.

86. By the conduct alleged in paragraph 83, above, Coles:

86.1. conveyed to Austech that if Austech did not agree to make payments for the first Austech purported profit gap and the second Austech purported profit gap, Coles would pursue Austech for the Austech net purported profit gap;

PARTICULARS

The person to whom this was conveyed and who had the understanding on behalf of Austech was Andrew Chaney.

86.2. intended to convey to Austech that if Austech did not agree to make payments for the first Austech purported profit gap and the second Austech purported profit gap, Coles would pursue Austech for the Austech net purported profit gap.

PARTICULARS

(a) the person who had this intention on behalf of Coles was Angela Clarkson;

(b) that Ms Clarkson had this intention is to be inferred from the content of the emails alleged in paragraphs 83, above, and 88, below.

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87. On 23 June 2011, Austech, by email to Coles, informed Coles that:

87.1. in light of Coles' assertion of the Austech net purported profit gap, Austech would need to confirm acceptance of the first Austech purported profit gap and the second Austech purported profit gap;

87.2. it did not understand how Coles could claim payments for profit gaps based on the information that Coles had provided;

87.3. it proposed using an upcoming meeting to discuss how Coles reached the figures for the profit gaps as Austech had charged no price increases to Coles for over 3 years and one of Austech's product lines had been deleted;

87.4. it would like to know if it would be possible, to help Austech's cash flow, to split Coles' claims for payments for the first Austech purported profit gap and the second Austech purported profit gap over the next two payments due from Coles to Austech.

PARTICULARS

The email was sent by Andrew Chaney, on behalf of Austech, to Angela Clarkson, on behalf of Coles, lain Chaney, on behalf of Austech and Richard Crettenden of SSB, on behalf of Austech, copied to Joey Yeung of Coles, on 23 June 2011 at 12:49 pm.

88. On 23 June 2011, Coles, by email to Austech, informed Austech that:

88.1. Coles required payments before the end of the 2011 financial year for the first Austech purported profit gap and the second Austech purported profit gap; and

88.2. Coles was going to process claims against Austech tor payments tor the first Austech purported profit gap and the second Austech purported profit gap within 7 days.

PARTICULARS

The email was sent by Angela Clarkson, on behalf of Coles, to Andrew Chaney and lain Chaney, on behalf of Austech, and Richard Crettenden of SSB, on behalf of Austech, copied to Joey Yeung of Coles, on 23 June 2011 at 1:46pm.

Claim for retrospective waste payment

89. On or about 21 June 2011, Coles informed Austech that there had been waste on one of Austech's product lines during the 2011 Financial Year.

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PARTICULARS

Les Sargent, on behalf of Coles, informed Richard Crettenden of SSB, on behalf of Austech, of the matters in this paragraph on or about 21 June 2011.

90. On 23 June 2011, Coles, by email to Austech:

90.1. informed Austech that Coles was looking for a payment of $5,700 from Austech for the waste referred to in paragraph 89 above;

90.2. indicated that there was a purported profit gap on selling Austech's laundry product lines in the 2011 Financial Year, which would also be covered by making the payment referred to in paragraph 90.1, above;

90.3. sought a response to the matter referred to in paragraph 90.1, above, within 3 hours.

PARTICULARS

The email was sent by Les Sargent, on behalf of Coles, to Andrew Chaney, on behalf of Austech, on 23 June 2011 at 2:02pm.

91. At no time did Coles identify:

91.1. the cause of the waste alleged in paragraph 89 above;

91 .2. any conduct or omission by Austech that had contributed to the causes of the waste referred to in paragraph 89 above.

92. For the 2011 Financial Year, the Trading Arrangements between Austech and Coles:

92.1. included a term that required Austech to pay an ongoing rebate for ullage, regardless of whether or not ullage occurred in relation to products that Coles acquired from Austech;

92.2. did not include a term that required Austech to make a payment to Coles for waste or markdowns.

93. At no time did Coles have a reasonable basis to believe that it was entitled to seek the payment for waste from Austech that it sought on 23 June 2011 because of the matters alleged in paragraphs 18.2, 91 and 92 above.

94. On 23 June 2011, Austech, by email to Coles:

94.1. stated that it did not understand what Coles meant by 'waste';

94.2. informed Coles that Austech already paid Coles a rebate for ullage;

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94.3. sought further information in relation to the payment for waste being sought by Coles and the causes of the waste;

94.4. referred to a report that Coles had provided to Austech, which indicated that there had been a reduction in waste from the previous year; and

94.5. offered to pay Coles half of the amount that Coles had sought for waste.

PARTICULARS

The email was sent by Andrew Chaney, on behalf of Austech, to Les Sargent, on behalf of Coles, on 23 June 2011 at 3:08 pm.

95. On 23 June 2011, Coles, by email, to Austech asserted to Austech that:

95.1. Coles had a purported profit gap of $4,860.98 on selling Austech's laundry product lines in the 2011 Financial Year {the Austech laundry purported profit gap);

95.2. having regard to the fact that Austech made payments for ullage, Coles required a payment of $3,186 from Austech in respect of the waste referred to in paragraph 89 above; and

95.3. Coles also required Austech to make a payment to Coles of $4,860.98 in respect of the Austech laundry purported profit gap.

PARTICULARS

The email was sent by Les Sargent, on behalf of Coles, to Andrew Chaney, on behalf of Austech, on 23 June 2011 at 4:09pm.

96. Coles had not identified the cause of the Austech laundry purported profit gap before it engaged in the conduct alleged in paragraph 95, above.

97. At no time did Coles identify any conduct or omission by Austech that had resulted in the Austech laundry purported profit gap.

98. At no time did Coles have a reasonable basis to believe that it was entitled to seek the payment from Austech for the Austech laundry purported profit gap because of the matters alleged in paragraphs 17.2, 68, 96 and 97, above.

99. By the conduct alleged in 95, above, Coles:

99.1. conveyed to Austech that if Austech did not agree to make a payment of $5,700 for waste, Coles would pursue Austech for $8,046.98, which was the total of the amounts set out in paragraphs 95.1 and 95.2, above;

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PARTICULARS

The person to whom this was conveyed and who had the understanding on behalf of Austech was Andrew Chaney.

99.2. intended to convey to Austech that if Austech did not agree to make a payment of $5,700 for waste, Coles would pursue Austech for $8,046.98;

PARTICULARS

(a) The person who had this intention on behalf of Coles was Les Sargent;

(b) That Mr Sargent had this intention is to be inferred from the content of the emails alleged in paragraphs 95, above, and 101, below.

100. On 23 June 2011, Austech replied to the email in paragraph 95 above and, amongst other things, stated that Austech:

1 00.1. would agree to make the waste payment of $5,700 referred to in paragraph 90 above to Coles;

1 00.2. did not understand how the purported profit gaps that Coles had been claiming had arisen.

PARTICULARS

The email was sent by Andrew Chaney, on behalf of Austech, to Les Sargent, on behalf of Coles, on 23 June 2011 at 5:18pm.

101. On 24 June 2011, Coles, by email, informed Austech that Coles would agree to the waste payment of $5,700 sought in the email referred to in paragraph 90 above in lieu of the amount of $8,046.98 sought in the email referred to in paragraph 95 above.

PARTICULARS

The email was sent by Les Sargent, on behalf of Coles, to Andrew Chaney, on behalf of Austech, on 24 June 2011 at 6:53am.

Refusing to end deferred deal

102. In around late July and early August 2011, Coles conducted a range review in relation to the household cleaning products that it acquired from its Suppliers for sale in Coles' retail stores (the Household Range Review).

103. On 12 August 2011 Coles, by email, informed Austech that, amongst other things:

1 03.1. following the Household Range Review, Coles were deleting two of the products lines that it acquired from Austech for sale in Coles' retail stores; and

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1 03.2. Coles required Austech to fully fund the markdowns of those product lines.

PARTICULARS

The email was sent by Angela Clarkson, on behalf of Coles, to Richard Crettenden of SSB, on behalf of Austech, copied to Andrew Chaney of Austech, and Karen Hooke and Les Sargent of Coles, on 12 August 2011 at 3:04pm.

104. One of the product lines referred to in paragraph 103, above, was Austech's Orange Power Shower, Bath and Tile Trigger 750 ml (Shower Cleaner).

105. As at August 2011, Shower Cleaner was one of Austech's largest selling product lines in terms of volume of sales.

106. As at August 2011, a significant percentage of Austech's production volume of Shower Cleaner was acquired by Coles.

PARTICULARS

Particulars of the percentage referred to in paragraph 1 06, above, are confidential and will be delivered separately.

107. On 12 August 2011, Austech replied to the email referred to in paragraph 103, above, and, amongst other things:

1 07.1. stated that Coles had not informed Austech, during the recent Household Range Review, that the Shower Cleaner product line might be deleted;

107.2. informed Coles:

1 07.2.1. of the matters in paragraphs 105 and 106, above;

1 07.2.2. that Austech had invested a significant amount of money in a promotional campaign to be launched in October 2011, which was demonstrated to Coles during the Household Range Review, in which Shower Cleaner featured heavily;

1 07.2.3. having regard to the financial consequences of Coles' decision to delete the Shower Cleaner product line, Austech wanted to discuss the decision with Coles.

PARTICULARS

(a) The email was sent by Andrew Chaney, on behalf of Austech, to Angela Clarkson, on behalf of Coles, and Richard Crettenden of SSB, on behalf of Austech, copied to Karen Hooke and Les Sargent of Coles, on 12 August 2011 at 4:43pm.

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(b) Particulars of the significant amount of money referred to in paragraph 1 07.2.2, above, are confidential and will be delivered separately.

108. On 15 August 2011, Austech sent a further email to Coles in relation to Coles' decision to delete the Shower Cleaner product line, and stated that, in light of the resignation of the Coles representative with whom Austech had been dealing, Austech sought a meeting with a different Coles representative to discuss the deletion of the Shower Cleaner product line.

PARTICULARS

The email was sent by Andrew Chaney, on behalf of Austech, to Anna Croft, on behalf of Coles, on 15 August 2011 at 12:37pm.

109. Between 15 August 2011 and 25 August 2011, at a meeting between a representative of Austech and representatives of Coles, Coles:

1 09.1. agreed not to delete Shower Cleaner from Coles' retail stores;

1 09.2. informed Austech that, in order to continue to acquire products from Austech for sale in Coles' retail stores, Coles needed to improve its profit margin on those products, and required a "deferred rebate" from Austech.

PARTICULARS

(a) The meeting was attended by, inter alia, Andrew Chaney, on behalf of Austech, and Anna Croft and Les Sargent, on behalf of Coles, between 15 August 2011 and 25 August 2011.

(b) Anna Croft or Les Sargent made the statements on behalf of Coles alleged in paragraphs 1 09.2, above.

110. Coles used the term "deferred rebate" to refer to a rebate paid by a Supplier to Coles that was calculated per unit of a Supplier's product and would be in effect for a certain period of time or would apply to a certain number of units of a Supplier's product.

111. On 25 August 2011, Austech, by email, amongst other things:

111 .1. indicated that it was financially difficult for Austech to make changes to improve Coles' profit margin, partly because Austech had not increased its price to Coles for a number of years, despite an increase in the costs of essential raw materials;

111.2. in the context of communicating to Coles that Austech considered that it was necessary for Austech to have its products available for sale in Coles' retail stores, Austech offered deferred rebates on three of Austech's product lines to improve Coles' profit margin (the Austech deferred deal).

PARTICULARS

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The email was sent by Andrew Chaney, on behalf of Austech, to Les Sargent, on behalf of Coles, copied to lain Chaney of Austech, on 25 August 2011 at 1:43pm.

112. On 30 August 2011, Austech, by email, provided Coles with the necessary documentation to implement the Austech deferred deal until further notice.

PARTICULARS

(a) The email was sent by Richard Crettenden of SSB, on behalf of Austech, to Sue Campbell, on behalf of Coles, copied to Karen Hooke of Coles, and Andrew and lain Chaney of Austech, on 30 August 2011 at 4:12pm.

(b) The documentation referred to in paragraph 112 was a promotional amendment form or PAF.

113. On 31 August 2011, Coles, by email, informed Austech that the Austech deferred deal would operate for the period from 5 September 2011 to 27 November 2011 and, if required, Coles would request an extension to the Austech deferred deal closer to the end of that period.

PARTICULARS

The email was sent by Karen Hooke, on behalf of Coles, to Richard Crettenden of SSB, on behalf of Austech, and Sue Campbell, on behalf of Coles, copied to Andrew and lain Chaney of Austech, on 31 August 2011 at 6:57am.

114. In or around October 2011, Coles sought an ARC rebate from Austech.

115. On 19 October 2011, Austech, by email to Coles, in the context of considering the ARC rebate, requested that, amongst other things, Coles provide an assurance that the Austech deferred deal would conclude on 27 November 2011.

PARTICULARS

The email was sent by Andrew Chaney, on behalf of Austech, to Sue Campbell, on behalf of Coles, on 19 October 2011 with a timestamp of 6:22pm.

116. On 19 October 2011, Coles responded to the email referred to in paragraph 115 above and informed Austech that, amongst other things, the Austech deferred deal would conclude on 27 November 2011, unless Austech and Coles agreed to extend it.

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PARTICULARS

The email was sent by Sue Campbell, on behalf of Coles, to Andrew Chaney, on behalf of Austech, on 19 October 2011 with a timestamp of 6:50pm.

117. On 20 October 2011, in response to the email from Coles alleged in paragraph 116, Austech signed trading terms with Coles providing for the ARC rebate and sent those terms to Coles.

PARTICULARS

Andrew Chaney, on behalf of Austech, signed the trading terms document and sent it to Coles as an attachment to an email that he sent to Sue Campbell, on behalf of Coles, on 20 October 2011 at 1:40pm.

118. On 15 November 2011, Coles requested, by email, that Austech agree to an extension of the Austech deferred deal for a further 12 months.

PARTICULARS

The email was sent by Karen Hooke, on behalf of Coles, to Richard Crettenden of SSB, on behalf of Austech, and Sue Campbell, on behalf of Coles, copied to Andrew and lain Chaney of Austech, on 15 November 2011 at 8:20am.

119. On 16 November 2011, Austech, by email, informed Coles that:

119.1. Austech did not agree to extend the Austech deferred deal;

119.2. Austech had agreed to pay the ARC rebate on the basis that the Austech deferred deal would end on 27 November 2011.

PARTICULARS

The email was sent by Andrew Chaney, on behalf of Austech, to Karen Hooke and Sue Campbell, on behalf of Coles, and Richard Crettenden of SSB, on behalf of Austech, copied to lain Chaney of Austech, on 16 November 2011 with a timestamp of 9:22am.

120. On 16 November 2011, Coles responded to the email referred to in paragraph 119, above, indicating that it was satisfied with Austech's response outlined in that email.

PARTICULARS

The email was sent by Karen Hooke, on behalf of Coles, to Andrew Chaney, on behalf of Austech, Richard Crettenden of SSB, on behalf of Austech, and Sue Campbell, on behalf of Coles, copied to Andrew and lain Chaney of Austech, on 16 November 2011 at approximately 9:26am.

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121. On 17 November 2011, Coles sent a further response to the email referred to in paragraph 119, above, informing Austech that Coles would not remove the Austech deferred deal.

PARTICULARS

The email was sent by Sue Campbell, on behalf of Coles, to Andrew Chaney, on behalf of Austech, Richard Crettenden of SSB, on behalf of Austech, and Karen Hooke, on behalf of Coles, copied to Andrew Chaney and lain Chaney of Austech, on 17 November 2011 at 7:59am.

122. The effect of Coles' refusal to remove the Austech deferred deal, alleged in paragraph 121, was that the three rebates constituting the Austech deferred deal would continue to be deducted by Coles from the amounts that Coles was obliged to pay to Austech for products purchased from Austech.

123. On 21 November 2011, Austech replied to the email referred to in paragraph 121, above, and informed Coles that Austech considered that it was necessary for Austech to have its products available for sale in Coles' retail stores and that Austech wanted to meet Coles' requirements, referred to the financial difficulties involved in continuing the Austech deferred deal and offered, as a compromise, to extend the Austech deferred deal for a further 6 months.

PARTICULARS

The email was sent by lain Chaney, on behalf of Austech, to Sue Campbell, on behalf of Coles, copied to Andrew Chaney of Austech, Richard Crettenden of SSB, on behalf of Austech, and Karen Hooke of Coles, on 21 November 2011 at 9:24am.


124. In its dealings with Austech alleged above, Coles was in a substantially stronger bargaining position relative to Austech:


124.2. which is further to be inferred from the fact that Coles engaged, and considered itself able to engage, and was in fact able to engage, in the conduct alleged in paragraphs 69 to 123, above.

125. In respect of each of the first Austech purported profit gap and the second Austech purported profit gap (the Austech purported profit gaps) as alleged in paragraphs 69 to 88, above, the assertion of an entitlement was conduct of Coles that was unconscionable, in contravention of section 22 of the Australian Consumer Law, in all of the circumstances, including that:

125.1. Coles was in a substantially stronger bargaining position relative to Austech as alleged in paragraph 124, above;

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125.2. Coles knew or ought to have known that it had no legitimate basis for asserting an entitlement to payments from Austech in relation to the Austech purported profit gaps having regard to the matters alleged in:

125.2.1. in respect of each purported profit gap, paragraphs 17.2, 68, 76.2 to 76.4, 78.3, 78.5 and 82.1 above; and

125.2.2. in respect of the first Austech purported profit gap, paragraphs 71 and 72,above;and

125.2.3. in respect of the second Austech purported profit gap, paragraphs 79 and 80, above;

125.3. Coles failed to disclose details about each of the Austech purported profit gaps to Austech to enable Austech to understand the basis upon which the demands were made, how each of the Austech purported profit gaps were calculated and how each of the Austech purported profit gaps were caused, despite Austech requesting such information, as alleged in paragraphs 74.3 and 77.2, and drawing Coles' attention to the request for information, as alleged in paragraph 82.2, and indicating that it could not identify a cause of the Austech purported profit gaps for which it was responsible, as outlined in paragraphs 7 4.1, 76.1, 82.1, 82.3, 87.2, 87.3 and 100.2 above;

125.4. Coles applied undue pressure to Austech by pressing Austech for an urgent response to Coles' requests for payments for the Austech purported profit gaps;

125.5. after Austech had initially refused to make the payments for the first Austech purported profit gap and the second Austech purported profit gap, Coles applied undue pressure to Austech to agree to make those payments by asserting an entitlement to the Austech net purported profit gap, in circumstances where:

125.5.1. Coles knew or ought to have known that it had no legitimate basis for asserting an entitlement to a payment from Austech for the Austech net purported profit gap, having regard to the matters alleged in paragraphs 17.2, 68, 84 and 85, above;

125.5.2. having regard to the matters alleged in paragraph 86, above, the assertion of an entitlement to a payment for the Austech net purported profit gap was a threat to Austech to pursue payment for the Austech net purported profit gap unless Austech agreed to make payments for the first Austech purported profit gap and the second Austech purported profit gap;


125.7. Coles took advantage of its substantially stronger bargaining position relative to Austech by asserting an entitlement to payments for each of the Austech

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purported profit gaps, persisting in making each of the claims without disclosing details about the Austech purported profit gaps and applying undue pressure to Austech to respond.

126. The conduct of Coles alleged in paragraphs 89 to 1 01, above, of requiring Austech to make a payment for waste to Coles, was unconscionable, in contravention of section 22 of the Australian Consumer Law, in all of the circumstances, including that:

126.1. Coles was in a substantially stronger bargaining position relative to Austech as alleged in paragraph 124;

126.2. Coles knew or ought to have known that it had no legitimate basis tor asserting an entitlement to a payment from Austech tor waste having regard to the matters alleged in paragraph 18.2, 91 and 92, above;

126.3. Coles failed to disclose details about the waste to enable Austech to understand the causes of waste, what contribution, if any, Austech had made to the causes of waste, the basis upon which the demands were made or how the payment was calculated;

126.4. Coles applied undue pressure to Austech to agree to make the payment for waste, after Austech had initially refused to make the payment sought, by asserting an entitlement to a payment tor the Austech laundry purported profit gap in circumstances where Coles knew or ought to have known that it had no legitimate basis tor asserting such an entitlement having regard to the matters alleged paragraphs 17.2, 68, 96, 97 and 98, above;

126.5. the conduct was consistent with the matters alleged in paragraphs 16 and 18, above;

126.6. Coles took advantage of its substantially stronger bargaining position relative to Austech by requiring Austech to make a payment for waste without disclosing details about the waste and applying undue pressure to Austech to respond.

127. Further or in the alternative to paragraphs 125 and 126, above, by engaging in the conduct alleged in paragraphs 69 to 101 above of persistently seeking payments from Austech to which Coles had no contractual entitlement throughout the relevant period, Coles engaged in conduct that was unconscionable, in contravention of section 22 of the Australian Consumer Law, in all the circumstances, including that:

127.1. the circumstances identified in paragraphs 125 and 126, above;

127.2. the conduct was consistent with the encouragement and/or requirement of Coles, as alleged in paragraph 16, above.

128. The conduct of Coles alleged in paragraphs 1 03 to 121, above, of agreeing to end the Austech deferred deal so as to obtain payment of the ARC rebate and then subsequently refusing to end the Austech deferred deal, was unconscionable in

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contravention of section 22 of the Australian Consumer Law in all of the circumstances, including:

128.1. Coles was in a substantially stronger bargaining position relative to Austech, as alleged in paragraph 124, together with the matters alleged in paragraphs 1 05 to 1 07, above;

128.2. Coles knew that it had a substantially stronger bargaining position relative to Austech, particularly with respect to Shower Cleaner, as a consequence of the matters alleged in paragraphs 1 05 to 1 07, above;

128.3. Coles agreed that the Austech deferred deal would end on 27 November 2011 so as to obtain Austech's agreement to pay the ARC rebate to Coles;

128.4. Coles subsequently refused to allow the Austech deferred deal to end on 27 November 2011, notwithstanding its agreement to do so;

128.5. Coles took advantage of its substantially stronger bargaining position relative to Austech by refusing to end the Austech deferred deal on 27 November 2011, notwithstanding its earlier agreement to do so.

Claims made against Colonial Farm (Aust.) Pty Limited (ACN 006 376 754)

129. During the relevant period, Coles acquired goods for retail sale in Coles' retail stores from Colonial Farm (Aust) Pty Ltd (ACN 004 189 708) (Colonial Farm).

130. The goods referred to in paragraph 129 above, were:

130.1. frozen processed food products; and

130.2. goods with a minimum shelf life of at least 12 months.



131.2. Colonial Farm had annual revenue of less than 0.25% of Coles' annual revenue.


132.1. Coles was Colonial Farm's major retail customer;

132.2. if Coles had ceased acquiring products from Colonial Farm:

132.2.1. it would have been very difficult for Colonial Farm to replace those sales with a similar volume or value of sales to other customers;

132.2.2. Coles could readily and fairly easily arrange supplies of substitute products in similar quantities from another Supplier;

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132.3. if Coles ceased acquiring products from Colonial Farm it would have increased the average cost to Colonial Farm of the goods that it sold.

132.4. Colonial Farm was concerned about the possibility that Coles could delete one or more of Colonial Farm's products.

PARTICULARS

Richard Galloway and Michael Kinsella had the state of mind attributed to Colonial Farm.

133. The Trading Arrangements between Colonial Farm and Coles were documented in:

133.1. a Trading Terms Letter, for the period 18 October 2010 to 18 October 2012, dated 19 May 2011;

133.2. a Trading Terms Letter, for the period 31 October 2011 to 31 October 2013, dated 30 December 2011; and

133.3. Trading Terms, for the period 31 October 2011 to, at least, 31 December 2011, signed by Colonial Farm on 24 October 2011.

Claims for retrospective waste payment and requiring a 100% waste agreement

134. On or about 16 September 2011, Coles decided that:

134.1 . in its Frozen Business Category, it was not meeting its budget targets for the financial year ending 30 June 2012 (2012 financial year);

134.2. a way to enable Coles to meet its budget targets in the Frozen Business Category for the 2012 financial year was to enter agreements with Suppliers pursuant to which those Suppliers would make payments to Coles that were equivalent to 100% of the purported costs to Coles of waste and markdowns on the products Coles acquired from those Suppliers (100% waste agreement).

PARTICULARS

(a) Todd Spencer and Philip Reidy had made the decision attributed to Coles in paragraph 134.2, above.

(b) That Todd Spencer and Philip Reidy had made this decision can be inferred from:

(i) An email from Todd Spencer, on behalf of Coles, to Philip Reidy, on behalf of Coles, on 16 September 2011 at 3:58 pm.

(ii) An email from Philip Reidy, on behalf of Coles, to various recipients including Daryl Desfosses, on behalf of Coles, on 19 September 2011 at 9:05 am.

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135. The effect of a 1 00% waste agreement was that a Supplier indemnified Coles against all of the purported costs to Coles of waste or markdowns, including waste or markdowns that were caused by Coles and were outside the control of the Supplier.

136. On 19 September 2011, Coles, by email:

136.1. provided its Category Managers in the Frozen Business Category with a report containing information about the purported costs to Coles of waste and markdowns that occurred in relation to products Coles acquired from the Suppliers listed in the report for its Frozen Business Category; and

136.2. instructed the Category Managers referred to in paragraph 136.1, above, to seek to obtain waste payments and 100% waste agreements from the Suppliers listed in the report in order to enable Coles to meet its budget targets in that Business Category for the 2012 financial year.

PARTICULARS

The report was attached to, and the instructions were contained in the emails referred to in the particulars to paragraph 134, above.

137. The report referred to in paragraph 136.1 above did not contain information about:

137.1 . the causes of waste and markdowns listed in the report; or

137.2. what, if any, contribution each of the Suppliers listed in the report had made to the causes of the waste and markdowns associated with their products in the report.

138. Coles issued the instructions referred to in paragraph 136.2 above in the circumstances referred to in paragraphs 18.2, 134, 135 and 137 above.

139. One of the Suppliers listed in the report referred to in paragraph 136.1 above was Colonial Farm.

140. As at 27 September 2011, the Trading Arrangements between Colonial Farm and Coles did not include a term that required Colonial Farm to make a payment to Coles for waste or markdowns.

141. On or about 27 September 2011, Coles requested, by telephone, that Colonial Farm enter into a 100% waste agreement with Coles.

PARTICULARS

The request was made during a telephone conversation between Daryl Desfosses, on behalf of Coles, and Michael Kinsella of K2 Sales Pty Ltd (K2 Sales), on behalf of Colonial Farm, on or about 27 September 2011.

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142. On 28 September 2011, Colonial Farm, by email to Coles, informed Coles that:

142.1. there was no agreement between Colonial Farm and Coles pursuant to which Coles was entitled to a payment for waste from Colonial Farm;

142.2. Colonial Farm was not in a financial position to make a payment for waste or enter a 1 00% waste agreement with Coles;

142.3. Colonial Farm had just renegotiated its trading terms with Coles;

142.4. the rebates paid by Colonial Farm to Coles on products that Coles acquired from Colonial Farm had increased very substantially over the preceding 12 months.

PARTICULARS

(a) The email was sent by Michael Kinsella of K2 Sales, on behalf of Colonial Farm, to Daryl Desfosses, on behalf of Coles, on 28 September 2011 at 11:17 am.

(b) Particulars of the very substantial increase in rebates referred to in paragraph 142.4, above, are confidential and will be delivered separately.

143. On 28 September 2011, Coles, by email to Colonial Farm:

143.1. informed Colonial Farm that Coles required Colonial Farm to agree to a 100% waste agreement; and

143.2. inferred that the development of further business between Coles and Colonial Farm depended upon Colonial Farm agreeing to a 100% waste agreement.

PARTICULARS

The email was sent by Daryl Desfosses, on behalf of Coles, to Michael Kinsella of K2 Sales, on behalf of Colonial Farm, on 28 September 2011 at 12:00 pm.

144. On 28 September 2011, Colonial Farm, by email to Coles in reply to the email alleged in paragraph 143, above:

144.1. requested details about the level of waste per store that Coles had claimed it had been incurring on the products it acquired from Colonial Farm;

144.2. stated that:

144.2.1. given that Colonial Farm supplied products to Coles' warehouses with a minimum shelf life of 12 months, Colonial Farm did not understand how it could be creating waste in Coles' stores; and

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144.2.2. if Coles could establish for Colonial Farm how waste was being caused, Colonial Farm could work with Coles to address the issue, rather than paying for waste that seemingly would continue.

PARTICULARS

The email was sent by Michael Kinsella of K2 Sales, on behalf of Colonial Farm, to Daryl Desfosses, on behalf of Coles, on 28 September 2011 at 12:30 pm.

145. On 5 October 2011, Coles sought an update, by email, from the Category Managers who received the instruction referred to in paragraph 136.2 above, as to how many of Coles' Suppliers in its Frozen Business Category the Category Managers had secured a 100% waste agreement with.

PARTICULARS

The email was sent by Philip Reidy, on behalf of Coles, to Daryl Desfosses, Marcus Deakes, Michael Phillips, Poli Pongas and Tanya Kleman, on behalf of Coles, on 5 October 2011 at 6:59am.

146. On 5 October 2011, Coles, by email to Colonial Farm:

146.1. provided Colonial Farm with a report purporting to show the waste and markdowns that Coles claimed had occurred in relation to the products that Coles had acquired from Colonial Farm in the previous year;

146.2. again informed Colonial Farm that Coles required Colonial Farm to agree to a 1 00% waste agreement with Coles;

146.3. again inferred that the development of further business between Coles and Colonial Farm depended upon Colonial Farm agreeing to a 1 00% waste agreement;

146.4. requested a response within two days.

PARTICULARS

The email was sent by Daryl Desfosses, on behalf of Coles, to Michael Kinsella of K2 Sales, on behalf of Colonial Farm, on 5 October 2011 at 10:17 am.

14 7. The report referred to in paragraph 146.1 above did not contain the details that Colonial Farm had requested in the email referred to in paragraph 144.1 above.

148. On 5 October 2011, Colonial Farm, by email to Coles:

148.1. repeated its request for the details referred to in paragraph 144.1, above;

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148.2. informed Coles that the decision maker for Colonial Farm would not be available until 10 October 2011.

PARTICULARS

The email was sent by Michael Kinsella of K2 Sales, on behalf of Colonial Farm, to Daryl Desfosses, on behalf of Coles, on 5 October 2011 with a timestamp of 11 :36 am.


149.1. indicated that Coles would attempt to provide the information requested by Colonial Farm as alleged in paragraph 148 above;

149.2. requested that the 100% waste agreement be finalised on 10 October 2011.

PARTICULARS

The email was sent by Daryl Desfosses, on behalf of Coles, to Michael Kinsella of K2 Sales, on behalf of Colonial Farm on 5 October 2011 with a timestamp of 9:55 am.


150.1. provided Colonial Farm with another report purporting to show the waste and markdowns that Coles claimed had occurred in relation to the products that Coles had acquired from Colonial Farm in the preceding 15 months;

150.2. indicated that it would be difficult for Coles to provide Colonial Farm with the details requested by Colonial Farm, as alleged in paragraph 144.1 above;

150.3. stated that Coles required Colonial Farm to agree to a 100% waste agreement with Coles; and

150.4. stated that Colonial Farm was required to confirm its agreement by 10 October 2011.

PARTICULARS

The email was sent by Daryl Desfosses, on behalf of Coles, to Michael Kinsella of K2 Sales, on behalf of Colonial Farm, copied to Dendi Djajadi of Coles, on 6 October 2011 at 6:01 pm.

151. On 7 October 2011, Colonial Farm, by email to Coles, informed Coles that:

151.1. the report referred to in paragraph 150.1 above did not enable Colonial Farm to identify any contribution Colonial Farm had made, if any, to the causes of the waste and markdowns associated with their products in the report;

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151.2. Colonial Farm could not identify any causes of waste and markdowns that were attributable to Colonial Farm; and

151 .3. the 1 00% waste agreement sought by Coles meant that Coles had no responsibility for any action by Coles that resulted in waste and markdowns on the products Coles acquired from Colonial Farm.

PARTICULARS

The email was sent by Michael Kinsella of K2 Sales, on behalf of Colonial Farm, to Daryl Desfosses, on behalf of Coles, copied to Dendi Djajadi of Coles, on 7 October 2011 at 8:55 am.

152. On 10 October 2011, Colonial Farm, by email, informed Coles that:

152.1. Colonial Farm would agree to make a payment to Coles that is equivalent to 50% of the purported costs to Coles of the waste and markdowns that Coles claimed had occurred in relation to the products Coles acquired from Colonial Farm in the previous 12 months;

152.2. Colonial Farm would agree to make payments to Coles that are equivalent to 50% of the purported costs to Coles of the waste and markdowns that Coles claims occurs in relation to the products Coles acquires from Colonial Farm in the future on an ongoing basis (the 50% waste agreement);

152.3. Colonial Farm did not consider that it was responsible for, or could control, all waste and markdowns;

152.4. in agreeing to the matters in paragraphs 152.1 and 152.2 above, Colonial Farm:

152.4.1. wanted to work with Coles to identify the causes of waste and markdowns with a view to reducing waste and markdowns; and

152.4.2. would rely on monthly reporting of waste and markdowns by Coles to Colonial Farm.

PARTICULARS

The email was sent by Michael Kinsella of K2 Sales, on behalf of Colonial Farm, to Daryl Desfosses, on behalf of Coles, on 10 October 2011 at 12:43 pm.

153. On or about 10 October 2011, Coles informed Colonial Farm, by telephone, that:

153.1. the offer referred to in paragraph 152 above was not acceptable to Coles; and

153.2. Coles required Colonial Farm to agree to a 100% waste agreement with Coles.

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PARTICULARS

The telephone conversation was between Daryl Desfosses, on behalf of Coles, and Michael Kinsella of K2 Sales, on behalf of Colonial Farm, on or about 10 October 2011.

154. On 10 October 2011, Colonial Farm, by email to Coles, informed Coles that:

154.1. Colonial Farm would agree to make a payment to Coles that was equivalent to 60% of the purported costs to Coles of the waste and markdowns that Coles claimed had occurred in relation to the products Coles acquired from Colonial Farm in the previous 12 months; and

154.2. Colonial Farm would agree to make payments to Coles that were equivalent to 60% of the purported costs to Coles of the waste and markdowns that Coles claims occurs in relation to the products Coles acquires from Colonial Farm in the future on an ongoing basis (the Colonial Farm waste agreement);

154.3. Colonial Farm was making this proposal because it thought this would improve its future relationship with Coles.

PARTICULARS


155. On 10 October 2011, a Category Manager who received the instruction referred to in paragraph 136.2 above and the email referred to in paragraph 145 above, reported internally within Coles that:

155.1. he had sought 1 00% waste agreements from each of the Suppliers for whom he was responsible; and

155.2. he had obtained the agreements referred to in paragraphs 154.1 and 154.2 above from Colonial Farm, which he described as a "good win".

PARTICULARS

The email was sent by Daryl Desfosses, on behalf of Coles, to Philip Reidy, on behalf of Coles, on 10 October 2011 at 5:37 pm.

156. On 12 October 2011, Coles, by email to Colonial Farm, agreed to the offer referred to in paragraph 154 above, but indicated that Coles also required Colonial Farm to agree to pay another unrelated rebate to Coles by Wednesday of the following week.

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PARTICULARS

The email was sent by Daryl Desfosses, on behalf of Coles, to Michael Kinsella of K2 Sales, on behalf of Colonial Farm, on 12 October 2011 at 12:53 pm.

157. On 13 October 2011, Colonial Farm requested, by email, an explanation in relation to how Coles would claim payments for waste and markdowns from Colonial Farm.

PARTICULARS


158. Coles did not provide the information sought by Colonial Farm that is referred to in paragraph 157 above.


159. In its dealings with Colonial Farm alleged above, Coles was in a substantially stronger bargaining position relative to Colonial:


159.2. which is further to be inferred from the fact that Coles engaged, and considered itself able to engage, and was in fact able to engage, in the conduct alleged in paragraphs 141 to 158, above.

160. The conduct of Coles alleged in paragraphs 141 to 158, above, of requiring Colonial Farm to enter into the Colonial Farm waste agreement, was unconscionable in contravention of section 22 of the Australian Consumer Law in all of the circumstances, including that:

160.1. Coles was in a substantially stronger bargaining position relative to Colonial Farm as alleged in paragraph 159, above;

160.2. Coles knew or ought to have known that it had no legitimate basis for requiring Colonial Farm to agree to the Colonial Farm waste agreement having regard to the matters alleged in paragraphs 18.2, 130, 140, 144.2.1, 151.3 and 152.3, above, and the circumstances referred to in paragraph 138, above;

160.3. Coles failed to disclose details about the alleged waste and markdowns to enable Colonial Farm to understand the causes of the alleged waste and markdowns, what, if any, contribution Colonial Farm had made to the causes of the waste and markdowns and the basis upon which Coles required the Colonial Farm waste agreement, despite several requests for such information as outlined in paragraphs 144 and 148, above;

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160.4. Coles applied undue pressure to Colonial Farm to agree to the Colonial Farm waste agreement by:

160.4.1. implicitly threatening Colonial Farm, by the conduct alleged in paragraph 143.2 and 146.3, that Coles would take measures that were commercially detrimental to Colonial Farm if Colonial Farm did not agree to the 1 00% waste agreement;

160.4.2. pressing Colonial Farm for an urgent response to Coles' request for a 1 00% waste agreement;

160.4.3. pressing Colonial Farm to agree to a 1 00% waste agreement after Colonial Farm had offered to agree to the 50% waste agreement, despite not providing the details referred to in paragraph 160.3 above, in circumstances where Colonial Farm had informed Coles that Colonial Farm did not consider that it was responsible for, or could control, waste or markdowns, as alleged in paragraphs 151.2 and 152.3, above;

160.5. Coles used unfair tactics by conditionally agreeing to the Colonial Farm waste agreement, despite the fact that Coles knew that Colonial Farm did not consider that it was responsible for, or could control, waste or markdowns, as alleged in paragraphs 151.2 and 152.3, above, in order to pressure Colonial Farm to agree to another unrelated rebate, as outlined in paragraph 156, above;

160.6. the conduct was consistent with the encouragement and/or requirement of Coles, as alleged in paragraph 16, above;

160.7. Coles took advantage of its substantially stronger bargaining position relative to Colonial Farm by requiring Colonial Farm to agree to the Colonial Farm waste agreement without providing details about the causes of the waste or markdowns and applying undue pressure and using unfair tactics.

Claims made against Bayview Seafoods Pty Ltd (ACN 002 351 920)

161. During the relevant period, Coles acquired goods for retail sale in Coles' supermarkets from Bayview Seafoods Pty Ltd (ACN 002 351 920) (Bayview).

162. The goods referred to in paragraph 161 above, were frozen food products, with a long shelf life, and were acquired by Coles for its Frozen Business Category.


163.1 . Coles had annual revenue of $34.1 billion;

163.2. Bayview had annual revenue of less than 0.25% of Coles' annual revenue.


164.1. if Coles had ceased acquiring products from Bayview:

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164.1.1. it would have been very difficult or impossible for Bayview to replace those sales with sales to other customers of a similar value or volume;

164.1.2. Coles could readily and fairly easily arrange supplies of substitute products in similar quantities from another Supplier, as Bayview had at least one competitor capable of supplying Coles;

164.2. if Coles ceased acquiring products from Bayview it would have:

164.2.1. resulted in a loss of economies of scale for Bayview;

164.2.2. increased Bayview's cost of goods that it sold; and

164.2.3. reduced Bayview's ability to offer competitive pricing to other retailers;

164.3. Bayview was concerned about the possibility that Coles could delete one or more of Bayview's products.

PARTICULARS

Russell Smith had the state of mind attributed to Bayview.

165. The Trading Arrangements between Bayview and Coles were documented in a Trading Terms Letter, for the period 21 September 2009 to 21 September 2011, and continued to operate throughout the relevant period.

Requiring a 100% waste agreement

166. One of the Suppliers listed in the report referred to in paragraph 136.1 above was Bayview.

167. As at 6 October 2011, the Trading Arrangements between Bayview and Coles:

167.1. included a term that required Bayview to pay an ongoing rebate for ullage, regardless of whether or not ullage occurred in relation to products that Coles acquired from Bayview;

167.2. did not include a term that required Bayview to make a payment to Coles for waste or markdowns.

168. On 6 October 2011, Coles, by email to Bayview:

168.1. provided Bayview with a report purporting to show the waste and markdowns that Coles claimed had occurred in relation to the products that Coles had acquired from Bayview in the preceding 15 months;

168.2. stated that Coles could not bear the purported costs of waste and markdowns;

168.3. informed Bayview that Coles required Bayview to agree to a 100% waste agreement with effect from 1 July 2011;

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168.4. inferred that whether Coles continued to acquire products from Bayview depended upon whether Bayview agreed to a 1 00% waste agreement;

168.5. sought a response from Bayview by Tuesday, 11 October 2011.

PARTICULARS

The email was sent by Daryl Desfosses, on behalf of Coles, to Russell Smith, on behalf of Bayview, copied to Dendi Djajadi of Coles, on 6 October 2011 at 4:55pm.

169. On 10 October 2011, Bayview, by email to Coles:

169.1. stated that Bayview's products were frozen products with very good shelf life and therefore Bayview could not imagine what justification there was for the waste and markdowns listed in the report referred to in paragraph 168.1 above;

169.2. stated that Bayview deserved more detail about the waste and markdowns listed in the report referred to in paragraph 168.1, including the causes of the waste and markdowns; and

169.3. sought an explanation from Coles as to what the ullage payments referred to in paragraph 167.1 above covered.

PARTICULARS

The email was sent by Russell Smith, on behalf of Bayview, to Daryl Desfosses, on behalf of Coles, copied to Dendi Djajadi of Coles and Peter Ken newell and Bob Heycox of Bayview, on 10 October 2011 at 10:07am.

170. On or about 12 October 2011, during a telephone conversation between a representative of Coles and a representative of Bayview:

170.1. Coles said to Bayview that:

170.1.1. the ullage rebate payments made by Bayview to Coles, in accordance with the Trading Arrangements alleged in paragraph 167 above, only covered waste occurring in Coles' distribution centres;

170.1.2. Coles required Bayview to agree to the 100% waste agreement referred to in paragraph 168.3 above;

170.2. Bayview agreed to enter into a 100% waste agreement with effect from about 27 June 2011.

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PARTICULARS

The telephone conversation was between Daryl Desfosses, on behalf of Coles, and Russell Smith, on behalf of Bayview, on or about 12 October 2011, before the email referred to in paragraph 172 below was sent by Bayview to Coles.

171. During the telephone conversation alleged in paragraph 170, above, Coles did not provide Bayview with information about:

171.1. the causes of the waste and markdowns on the products Coles acquired from Bayview; or

171.2. how the purported costs of waste and markdowns, set out in the report referred to in paragraph 168.1 above, were calculated.

172. On 12 October 2011, Coles, by email to Bayview, made a request that Bayview confirm, in writing, the 100% waste agreement referred to in paragraph 170.2 above.

PARTICULARS

The email was sent by Daryl Desfosses, on behalf of Coles, to Russell Smith, on behalf of Bayview, on 12 October 2011 at 11:57 am.

173. On 12 October 2011, Bayview, by email to Coles, stated that:

173.1. It agreed to a 100% waste agreement "moving forward"; and

173.2. Bayview would work with Coles to determine the causes of any waste or markdowns that occurred in relation to the products that Coles acquired from Bayview, and to identify a remedy.

PARTICULARS

The email was sent by Russell Smith, on behalf of Bayview, to Daryl Desfosses, on behalf of Coles, on 12 October 2011 at 1:06pm.

17 4. On 12 October 2011, Coles, by email to Bayview, indicated that Coles would claim money from Bayview in accordance with the 1 00% waste and markdown agreement, referred to in paragraph 173 above, for purported waste and markdowns from 27 June 2011.

PARTICULARS

The email was sent by Daryl Desfosses, on behalf of Coles, to Russell Smith, on behalf of Bayview, on 12 October 2011 with a timestamp of 12:41pm.

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175. By the communications to Bayview alleged in paragraphs 168 and 170, above, Coles:

175.1 . conveyed to Bayview that it was necessary tor Bayview to enter into the 1 00% waste agreement referred to in paragraph 168.3, above, in order to maintain a trading relationship with Coles;

PARTICULARS

The person to whom this was conveyed and who had the understanding on behalf of Bayview was Russell Smith.

175.2. intended to convey to Bayview that it was necessary tor Bayview to enter into the 100% waste agreement referred to in paragraph 168.3, above, in order to maintain a trading relationship with Coles;

PARTICULARS

(a) The person who had the state of mind attributable to Coles was Daryl Destosses.

(b) That Mr Destosses had this intention is to be interred from:

(i) the content of the communications alleged in paragraphs 168 and 170, above;

(ii) the fact that Mr Destosses gave no explanation to Bayview as to the cause of the waste and markdowns set out in the report referred to in paragraph 168.1 above.

Penalty for late deliveries

176. By at least 21 October 2011, Coles was aware that Bayview was suffering financial hardship, partly as a result of the terms of its trading relationship with Coles.

PARTICULARS

(a) The person who had the state of mind attributable to Coles was Daryl Destosses.

(b) That Mr Destosses had this awareness is to be interred from the email from Russell Smith, on behalf of Bayview, to Daryl Desfosses, on behalf of Coles, on 21 October 2011 with a timestamp of 11 :14am.

177. On 21 October 2011, Coles, by email, informed some of its Suppliers, including Bayview, that, amongst other things, tor deliveries from 20 October 2011, Coles:

177.1. would impose a five dollar per carton penalty on Suppliers who did not deliver stock in full and as scheduled (the Frozen Business Category punitive measure);

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177.2. the Frozen Business Category punitive measure would not apply to the first 200 cartons delivered per day per category for each Supplier.

PARTICULARS

The email was sent by Daryl Desfosses, on behalf of Coles, to unknown recipients, which included Russell Smith, on behalf of Bayview, and copied to Dendi Djajadi, Frazer McClelland and lan Tifere of Coles, on 21 October 2011 with a timestamp of 5:09pm.

178. The amount of the Frozen Business Category punitive measure was not calculated by reference to any assessment by Coles of the likely cost to Coles, if any, of the Suppliers who received the email alleged in paragraph 177, above, not delivering in full and as scheduled.

179. The Trading Arrangements between Bayview and Coles, which are referred to in paragraph 165 above, did not contain a term pursuant to which:

179.1. Bayview was required to pay an amount to Coles for not delivering stock in full and as scheduled;

179.2. Coles could impose the Frozen Business Category punitive measure referred to in paragraph 177.1 above.

180. As at 21 October 2011, the margin that Bayview received from the sale of a carton of its products to Coles was less that the value of the Frozen Business Category punitive measure.

181. In or about October 2011, Bayview delivered 7,458 cartons of its products to Coles:

181.1. to be sold by Coles as part of a scheduled promotion;

181.2. but not in full on time (Bayview late delivery).

182. On or about 31 October 2011, during a telephone conversation between a representative of Coles and a representative of Bayview, Coles said that Bayview should:

182.1. pay a penalty, calculated by reference to the Frozen Business Category punitive measure, in relation to the Bayview late delivery;

182.2. make a payment to Coles for the difference between the revenue that Coles had previously forecast that it would derive from the scheduled promotion, as part of which the 7,458 cartons were to be sold, as compared with the revenue that it was now estimating that it would derive from the scheduled promotion.

PARTICULARS

The telephone conversation was between Daryl Desfosses, on behalf of Coles, and Russell Smith, on behalf of Bayview, on or about 31 October

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2011, before the email referred to in paragraph 183 below was sent by Coles to Bayview.

183. On 31 October 2011, following the conversation alleged in paragraph 182 above, Coles, by email to Bayview:

183.1 . informed Bayview that:

183.1.1. Coles considered there to have been 7,458 late and missed cartons, which was relied on for the purposes of calculating the Frozen Business Category punitive measure;

183.1.2. Coles had previously forecast that it would have revenue of $123,244 from the promotion whereas it now estimated that it would have revenue of $65,319 from the promotion;

183.2. requested that Bayview respond to the request referred to in paragraph 182 above by 1 Oam on Thursday, 3 November 2011.

PARTICULARS

The email was sent by Daryl Destosses, on behalf of Coles, to Russell Smith, on behalf of Bayview, on 31 October 2011 with a timestamp of 4:50pm.

184. The forecasted sales asserted by Coles, as alleged in paragraph 182.2 above, were unilaterally determined by Coles without any input, or agreement, from Bayview.

185. By about 31 October 2011, Coles determined a profit target tor its Frozen Business Category tor the week commencing 31 October 2011.

PARTICULARS

The weekly profit target was recorded in an email that was sent by Todd Spencer, on behalf of Coles, to Daryl Destosses, Michael Phillips, Tanya Kleman and Marcus Deakes, on behalf of Coles, copied to Philip Reidy of Coles, on 4 November 2011 at 8:30am.

186. On 3 November 2011, Bayview, by email to Coles, informed Coles that:

186.1 . Bayview did not believe that the Bayview late delivery caused Coles' retail stores to run out of stock;

186.2. Bayview was only informed about the Frozen Business Category punitive measures a week before the Bayview late delivery occurred;

186.3. Bayview believed that a penalty tor the Bayview late delivery would be unreasonable;

186.4. Bayview could not underwrite Coles' sales expectations;

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186.5. Bayview believed the major reason why Coles did not meet the forecast sales targets was because Coles did not discount the product as much as it had intended to when it determined the forecast sales;

186.6. Bayview required further information to determine whether the Bayview late delivery resulted in lost sales to Coles; and

186.7. Bayview believed that, whilst Bayview had suffered substantial losses in relation to the promotion, Coles did not.

PARTICULARS

The email was sent by Russell Smith, on behalf of Bayview, to Daryl Desfosses, on behalf of Coles, on 3 November 2011 with a timestamp of 10:49am.

187. On or about 3 November 2011, during one or more telephone conversations between a representative of Coles and a representative of Bayview, Coles said words to the effect that:

187 .1. Coles was disappointed by Bayview's response in the email referred to in paragraph 186 above;

187.2. Coles wanted Bayview to make the payments referred to in paragraph 182 above;

187.3. there may be negative consequences to Bayview's trading relationship with Coles if Bayview did not make the payments referred to in paragraph 182 above to Coles.

PARTICULARS

The telephone conversation or conversations were between Daryl Desfosses, on behalf of Coles, and Russell Smith, on behalf of Bayview, on or about 3 November 2011, after the email referred to in paragraph 186, above.

188. During the conversation or conversations alleged in paragraph 187, above, Coles did not provide Bayview with the further information sought by Bayview as alleged in paragraph 186.6.

189. On 4 November 2011, Coles, by email to its CMs in its Frozen Business Category, made a request that they internally report any money they were expecting to receive from Coles' Suppliers towards the profit target alleged in paragraph 185 above.

PARTICULARS

The email was sent by Todd Spencer, on behalf of Coles, to Daryl Desfosses, Michael Phillips, Tanya Kleman and Marcus Deakes, on

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behalf of Coles, copied to Philip Reidy of Coles, on 4 November 2011 at 8:30am.

190. On 4 November 2011, Mr Desfosses, the CM in the Frozen Business Category dealing with Bayview, internally reported that he was still trying to "land Bayview money" for the Bayview late delivery.

PARTICULARS

The email was sent by Daryl Desfosses, on behalf of Coles, to Todd Spencer, on behalf of Coles, on 4 November 2011 at 9:02 am.

191. On 4 November 2011, Coles, by email to Mr Desfosses:

191.1. informed Mr Desfosses that Coles required $42,000 to meet the profit target referred to in paragraph 185 above;

191.2. asked Mr Desfosses how much money Coles would receive from Bayview.

PARTICULARS

The email was sent by Todd Spencer, on behalf of Coles, to Daryl Desfosses, on behalf of Coles, on 4 November 2011 at 9:51 am.

192. On 4 November 2011, Mr Desfosses replied to the email referred to in paragraph 191 above, and reported that he hoped the money Coles would receive from Bayview was close to $42,000.

PARTICULARS

The email was sent by Daryl Desfosses, on behalf of Coles, to Todd Spencer, on behalf of Coles, on 4 November 2011 at 10:17 am.

193. On 4 November 2011, Coles by email to Mr Desfosses, made a request that Mr Desfosses respond as to how much money Coles would receive from Bayview.

PARTICULARS

The email was sent by Todd Spencer, on behalf of Coles, to Daryl Desfosses, on behalf of Coles, on 4 November 2011 at 11 :09 am.

194. By about 10 November 2011, Bayview:

194.1. agreed to make payments to Coles to the total value of approximately $30,500 in relation to the Bayview late delivery; and

194.2. commenced making the payments referred to in paragraph 194.1 above.

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195. In its dealings with Bayview alleged above, Coles was in a substantially stronger bargaining position relative to Bayview:

195.1. because of the matters alleged in paragraphs 11, 15, 163, 164, 175 and 176, above;

195.2. which is further to be inferred from the fact that Coles engaged, and considered itself able to engage, and was in fact able to engage, in the conduct alleged in paragraphs 168 to 194.

196. The conduct of Coles alleged in paragraphs 168 to 175, above, of requiring Bayview to agree to the 100% waste agreement, was unconscionable in contravention of section 22 of the Australian Consumer Law in all of the circumstances, including that:

196.1. Coles was in a substantially stronger bargaining position relative to Bayview as alleged in paragraph 195, above;

196.2. Coles knew or ought to have known that it had no legitimate basis for requiring Bayview to agree to the 100% waste agreement having regard to the matters alleged in paragraphs 18.2, 167.2 and 169.1, above, and the circumstances referred to in paragraph 138, above;

196.3. Coles failed to disclose details about the alleged waste to enable Bayview to understand the causes of the alleged waste, what contribution, if any, Bayview had made to the causes of the waste and the basis upon which Coles required Bayview to agree to the 1 00% waste agreement, despite:

196.3.1. Bayview requesting such information, as alleged in paragraph 169.2 above;

196.3.2. Coles knowing that Bayview did not understand how waste and markdowns occurred in relation to the products Coles acquired from Bayview;

196.4. Coles applied undue pressure to Bayview to agree to the 1 00% waste agreement by:

196.4. 1. implicitly threatening Bayview, by the conduct alleged in paragraph 168.4, that Coles would take measures that were commercially detrimental to Bayview if Bayview did not agree to the 1 00% waste agreement;

196.4.2. pressing Bayview for an urgent response to Coles' request for a 100% waste agreement.

196.5. Coles used unfair tactics by seeking a waste payment from Bayview that Coles knew or ought to have known that it had no legitimate basis for seeking

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having regard to the matters alleged in paragraphs 167.2, after Bayview had questioned the basis upon which Coles sought the 100% waste agreement, to pressure Bayview to agree to the 100% waste agreement;

196.6. the conduct was consistent with the encouragement and/or requirement of Coles, as alleged in paragraph 16, above;

196. 7. Coles took advantage of its substantially stronger bargaining position relative to Bayview by requiring Bayview to agree to the 1 00% waste agreement without providing details about the causes of the waste or markdowns, applying pressure and using unfair tactics.

197. The conduct of Coles alleged in paragraphs 177 to 194, above, of requiring Bayview to pay a penalty to Coles for the Bayview late delivery, was unconscionable, in contravention of section 22 of the Australian Consumer Law, in all of the circumstances, including that:

197.1. Coles was in a substantially stronger bargaining position relative to Bayview as alleged in paragraph 195, above;

197.2. Coles had no legitimate basis for asserting an entitlement to payment from Bayview of a penalty for the Bayview late delivery having regard to the matters alleged in paragraphs 178 and 179, above;

197.3. Coles failed to disclose adequate details about the Bayview late delivery to enable Bayview to understand whether, and to what extent, the Bayview late delivery had resulted in lost sales to Coles;

197.4. Coles applied undue pressure to Bayview, in circumstances where Coles was aware that Bayview was suffering financial hardship as alleged in paragraph 176 above, by:

197.4.1. requesting, in addition to the payment of a penalty for the Bayview late delivery, a payment to Coles because it did not meet its unilaterally determined sales forecast;

197.4.2. pressing Bayview for an urgent response to Coles' request for a payment of a penalty for the Bayview late delivery;

197.4.3. implicitly threatening Bayview, by the conduct alleged in paragraph 187.3, that Coles would take measures that were commercially detrimental to Bayview if Bayview did not agree to make the payments referred to in paragraph 197.4.1, above;

197 .5. Coles pressed Bayview to agree to make a payment for the Bayview late delivery without providing Bayview with the information that Bayview had sought so as to meet the internal profit target that Coles had set for itself;


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197. 7. Coles took advantage of its substantially stronger bargaining position relative to Bayview by requiring Bayview to make a payment of a penalty for the Bayview late delivery in the circumstances alleged in paragraphs 197.2 to 197.4, above.

198. Further or in the alternative to paragraphs 196 and 197, above, by engaging in the conduct alleged in paragraphs 168 to 194 above of requiring Bayview to agree to the 1 00% waste agreement and to pay a penalty for the Bayview late delivery, Coles engaged in conduct that was unconscionable in contravention of section 22 of the Australian Consumer Law in all the circumstances identified in paragraphs 196 and 197, above.

Claims made against Benny's Confectionery Pty Ltd (ACN 114 669 626)

199. During the relevant period, Coles acquired goods for retail sale in Coles' retail stores from Benny's Confectionery Pty Ltd (ACN 114 669 626) (Benny's).



200.2. Benny's had annual revenue of less than 0.25% of Coles' annual revenue.


201.1. if Coles had ceased acquiring products from Benny's:

201.1.1. it would have been extremely difficult or impossible for Benny's to replace those sales with sales to other customers of a similar value or volume;

201.1.2. Coles could readily and fairly easily arrange supplies of substitute products in similar quantities from another Supplier, as Benny's had at least one competitor capable of supplying Coles;

201.2. Benny's was concerned about the possibility that Coles could delete the product that Benny's supplied to Coles.

PARTICULARS

Helene Bell had the state of mind attributed to Benny's.

202. During the relevant period, the Trading Arrangements between Benny's and Coles did not include a term that required Benny's to make a payment to Coles for late or short deliveries.

Penalty for short deliveries

203. On 2 August 2011, Coles, by email, informed some of its Suppliers in its Confectionery Category that, amongst other things, for any product line that Coles

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acquired from the Suppliers who received the email that was out of stock in Coles' distribution centres for over a week, Coles would:

203.1. delete the product line, meaning that Coles would no longer acquire the product from the Supplier for sale in Coles' retail stores; or

203.2. maintain the product line in the range available for sale at Coles' retail stores, but claim $10 per unsupplied carton and delete the product line if it was not supplied to Coles' Distribution Centres for three weeks.

PARTICULARS

The email was sent by Steve Martin, on behalf of Coles, to an unknown list of confectionery Suppliers, copied to Adam Lovie and Philip Armstrong of Coles, on 2 August 2011 at 11 :23am.

204. On 15 September 2011, Coles, by email to Benny's, stated that:

204.1. Benny's had not supplied 95 cartons to Coles;

204.2. Coles would impose a standard rate fine of $10 per carton for each carton that Benny's did not supply to Coles; and

204.3. Coles would raise a claim for $950 from Benny's.

PARTICULARS

The email was sent by Adam Lovie, on behalf of Coles, to Michael Burns, on behalf of Benny's, copied to Steve Martin and Sergiu Belbe of Coles, on 15 September 2011 at 1 0:24am.

205. The email alleged in paragraph 204, above, included a table, which contained, amongst other things, the following information:

205.1. the number of cartons that were meant to be included in the order;

205.2. the order number;

205.3. the date the deliveries referred to in the table were to be made; and

205.4. the number of alleged unsupplied cartons.

206. On 15 September 2011, Benny's, by emails to Coles, informed Coles that:

206.1. Benny's had supplied stock as required by Coles;

206.2. Benny's had not previously been advised of, or agreed to, the fines referred to in paragraph 204.2, above;

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206.3. there were errors in the information that Coles was relying on in support of the claim referred to in paragraph 204.3, above;

206.4. Benny's would not accept the claim alleged in paragraph 204.3, above; and

206.5. the per carton fine referred to in paragraph 204.2 above exceeded the margin that Benny's made on each carton of the product Coles acquired from Benny's.

PARTICULARS

This information was communicated to Coles in two emails, both were sent by Michael Burns, on behalf of Benny's, to Adam Lovie, on behalf of Coles, copied to Steve Martin and Sergiu Selbe of Coles, on 15 September 2011. The first was sent at 11:21 am and the second was sent at 1:53pm.

207. Despite the response from Benny's alleged in paragraph 206 above, on 16 September 2011, Coles issued Benny's with a 'Credit Advice Tax Invoice' for the amount of $1,045 (GST inclusive), which is $950 (excluding GST}.

208. On or about 21 September 2011, without the authority or agreement of Benny's, Coles deducted the $1,045 (GST inclusive) referred to in paragraph 204.3 above from a remittance due to Benny's for products that Coles had purchased from Benny's.


209.1. Benny's had not supplied 54 cartons to Coles;

209.2. Coles would raise claims for all unsupplied cartons at the rate of $10 per carton; and

209.3. Coles would raise a claim for $540 from Benny's.

PARTICULARS

The email was sent by Steve Martin, on behalf of Coles, to Michael Burns, on behalf of Benny's, on 22 September 2011 at 2:43pm.

210. On 22 September 2011, Benny's, by email to Coles, informed Coles that:

21 0.1. Benny's had not previously been advised of, or agreed to, the matters referred to in paragraphs 204.2 and 209.2, above;

21 0.2. Benny's would not accept the claims referred to in paragraphs 204.3 and 209.3, above, particularly having regard to the cost price of Benny's products to Coles;

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21 0.3. there were significant errors in the information that Coles was relying on in support of the claims;

21 0.4. the standard rate fine of $10 per carton for all Suppliers was unfair and unreasonable; and

21 0.5. Benny's wanted to meet with Coles to discuss the claims and other matters.

PARTICULARS

The email was sent by Michael Burns, on behalf of Benny's, to Steve Martin, on behalf of Coles, and Aaron and Helene Bell, on behalf of Benny's, copied to Sergiu Belbe of Coles, on 22 September 2011 at 3:26pm.

211. On 22 September 2011, Coles, by email to Benny's, stated that the claim referred to in paragraph 209.3, above, would stand.

PARTICULARS

The email was sent by Steve Martin, on behalf of Coles, to Michael Burns, on behalf of Benny's, on 22 September 2011 at 3:37pm.

212. Despite the request from Benny's alleged in paragraph 210.5 above, Coles did not meet with Benny's to discuss the claims.

213. Between 22 and 27 September 2011, Benny's made several unsuccessful attempts to contact Coles to discuss the claims referred to in paragraph 204.3 and 209.3 above.

214. On 27 September 2011, Benny's, by email to Coles, referred to the attempts that Benny's had made to contact Coles, and informed Coles that:

214.1. Benny's had not previously been advised of, or agreed to, the matters referred to in paragraphs 204.2 and 209.2, above;

214.2. there were errors in the information that Coles was relying on in support of the claims; and

214.3. Benny's considered the standard rate fine of $10 per carton to be unjustifiable, having regard to the price Coles pays to Benny's to acquire products from Benny's.

PARTICULARS

The email was sent by Michael Burns, on behalf of Benny's, to Steve Martin, on behalf of Coles, copied to an email address used and controlled by representatives of Benny's, and Adam Lovie and Sergiu Selbe of Coles, on 27 September 2011 at 3:24pm

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215.1. the standard rate fine of $10 per carton for all Suppliers applies regardless of the cost of the product to Coles;

215.2. the claims raised against Benny's would stand; and

215.3. Coles would continue to raise claims for unsupplied cartons against Bennys.

PARTICULARS

The email was sent by Adam Lovie, on behalf of Coles, to Michael Burns, on behalf of Benny's, and Steve Martin on behalf of Coles, copied to Sergiu Belbe of Coles, and an email address used and controlled by representatives of Benny's, on 29 September 2011 at 8:43pm.

216. Despite the responses from Benny's alleged in paragraphs 210 and 214, above, on or about 29 September 2011, without the authority or agreement of Benny's, Coles deducted the $594 (GST inclusive) in relation to the claim referred to in paragraph 209.3 above from a remittance due to Benny's for products that Coles had purchased from Benny's.

217. By 11 November 2011, Coles had not provided Benny's with any further information to substantiate the claims referred to in paragraphs 204.3 and 209.3 above.

218. On 11 November 2011, Benny's, by email to Coles, requested further information in relation to the claim referred to in paragraph 209.3 above.

PARTICULARS

The request was contained in an email from Paula Kiss, on behalf of Benny's, to Sergiu Belbe, on behalf of Coles, on 11 November 2011 at 1:56pm.

219. On 23 November 2011, Coles, by email to Benny's, stated that the claim Benny's had sought further information about was for unsupplied cartons and offered to discuss the matter further with Benny's.

PARTICULARS

The email was from Steve Martin, on behalf of Coles, to Paula Kiss, on behalf of Benny's, copied to Sergiu Belbe of Coles, on 23 November 2011 at 2:13pm.

220. On 23 November 2011, Benny's, by email to Coles, stated that Benny's:

220.1. wished to discuss the claim referred to in paragraphs 218 and 219 above with Coles; and

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220.2. required further information about the claim.

PARTICULARS

The email was from Paula Kiss, on behalf of Benny's, to Steve Martin, on behalf of Coles, on 23 November 2011 at 2:37pm.

221. Coles did not respond to the requests referred to in paragraph 220 above.

222. Coles retained the money that it had deducted from remittances due to Benny's in relation to the claims referred to in paragraphs 204.3 and 209.3 above, without the authority or agreement of Benny's.


223. In its dealings with Benny's alleged above, Coles was in a substantially stronger bargaining position relative to Benny's:


223.2. which is further to be inferred from the fact that Coles engaged, and considered itself able to engage, and was in fact able to engage, in the conduct alleged in paragraphs 204 to 222.

224. The conduct of Coles alleged in paragraphs 204 to 222, above, of requiring Benny's to pay a penalties to Coles for alleged short deliveries and unlawfully appropriating money on the basis of those penalties, was unconscionable, in contravention of section 22 of the Australian Consumer Law, in all of the circumstances, including that:

224.1. Coles unlawfully appropriated money from Benny's;

224.2. Coles was in a substantially stronger bargaining position relative to Benny's as alleged in paragraph 223, above;

224.3. Coles had no legitimate basis for asserting an entitlement to payment of a penalty from Benny's for the alleged short deliveries having regard to the matters alleged in paragraphs 202, 206.1, 206.2, 210.1, 21 0.2, 214.1 and 220, above;

224.4. Coles failed to disclose adequate details to Benny's about the alleged short deliveries, despite the requests for such information by Benny's, and the disputes Benny's raised about the accuracy of the information being relied upon by Coles;

224.5. Coles applied undue pressure to Benny's by:

224.5.1. withholding the payments for the penalties for the alleged short deliveries in circumstances where Coles knew that Benny's disputed

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Coles' entitlement to the payments, as alleged in paragraphs 206, 210 and 214, above,

224.5.2. withholding the payments for the penalties for the alleged short deliveries in circumstances where Coles knew or ought to have known that the amounts sought were unfair and unjustified having regard to the value of the penalty when compared to the price Coles paid to Benny's for the products it acquired from Benny's, as alleged in paragraphs 206.5, 210.4 and 214.3, above;


224.7. Coles took advantage of its substantially stronger bargaining position relative to Benny's by:

224. 7.1. requiring Benny's to make the payments of the penalties for alleged short deliveries in the circumstances referred to in paragraphs 224.3 to 224.5, above;

224.7.2. appropriating money from Benny's without agreement and in circumstances where:

224.7.2.1. Coles had no legal right to appropriate the money;

224.7.2.2. Benny's disputed that Coles had any justification for, or entitlement to, appropriate the money.

And the Applicant claims the relief specified in the accompanying Application.

Norman O'Bryan SC and Michael Hodge of counsel.

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CERTIFICATE OF LAWYER

I, Glenn Owbridge, certify to the Court that, in relation to the statement of claim filed on behalf of the Applicant, the factual and legal material available to me at present provides a proper basis for each allegation in the pleading.

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FEDERAL COURT OF AUSTRALIA DISTRICT REGISTRY: VICTORIA Division: GENERAL

Respondents

Second Respondent

Date: 16 October 2014

Schedule

NoVID of 2014

Grocery Holdings Pty Ltd (ACN 007 427 581)

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