Designer Lures Pty Ltd v Tackle King Ltd [1996] QSC 267

• • '2 066 _>(J Sc qb"/2b 7- - . BureauJUSTICE State Reporting~.. ,-..:-.- o o TRANSCRIPT OF PROCEEDINGS Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bureau. SUPREME COURT OF QUEENSLAND CHAMBERS LEE J No 8572 of 1996 DESIGNER LURES PTY LTD and TACKLE KING (NZ) LIMITED BRISBANE .. DATE 1 5/11 /96 ORDER REVISED COPIES ISSUED State Reporting Bureau Date /2-/ 02-- / Plaintiff Defendant This ju~gment is to be copied for the purpose of research and private study 1 only. It IS not to be resold or used for republication in any other way without ~. permission. 1 Ith Flllllr, The Law Cuurts, Gl'or/-:c Stn:cl, Brishanc, Q. 4(01) Telcphollc: (07) 324743('0 F:lx: (07) Jl.t7 55.1l -- 1 of 10 -- o o 151196 T1/JAP/6 M/T 1199/96 (Lee J) HIS HONOUR: The plaintiff, by notice of motion, fileq 11 October 1996 seeks two substantive orders. One, a declaration that a written distribution agreement dated . 5 July 1995 between the plaintiff and the defendant is not enforceable for incompleteness and/or uncertainty and two, a declaration that the agreement has been lawfully terminated by the plaintiff pursuant to clause 15 of the agreement. This relief is that claimed in the Writ issued on the same date, which also includes a claim for damages for a breach of contract, interest and costs. The relief claimed today is limited to number one above and is said to be justified because of order 39, rule 12. In accordance with practice direction 12 of 1995 the parties have lodged written submissions. Those for the plaintiff are marked A and those for the defendant are marked B and both will be placed with the papers in accordance with that practice direction in the event that further proceedings 10 20 30 () ensue. These outlines mean that it will not be necessary to o state detailed reasons or to refer to all the points raised and will assist in enabling a speedy determination in the busy ~ Practice Court. Those submissions were supported by lengthy oral argument and a speedy decision is desirable. The agreement entered into on.5 July 1995 is, in substance, a contract for the sale of goods by the plaintiff to the 50 defendant. The term is for four years as provided by clause 1. It contains distribution and other reciprocal responsibilities. The plaintiff is situated on the Gold Coast and the defendant is in New Zealand. Amongst other things it 2 ORDER -- 2 of 10 -- o 151196 T1/JAP/6 M/T 1199/96 (Lee J) provides, in clause 13, that the defendant shall purchase - minimum quanfities of raider fishing lures in each of the four years of the agreement. Clause 2 requires the plaintiff to make exclusive supply to the defendant of those lures in New Zealand for the duration of the agreement and shall give the defendant first right of refusal for exclusive distribution of all products propuced by the plaintiff for the New Zealand market on terms no less favourable than those which may be offered to any other party. By clause 3 the defendant is prohibited from selling any other metal lure without the prior wriften consent of the plaintiff. By clause 12 the plaintiff is required to provide promotional lures for the first 12 10 20 c=) months. That clause also requires the defendant to incur expenditure on promotional aids and the like. o o Central to this application is clause 4 which provides as 30 follows: The heading is "price of Purchases from Designer Lures (a) The price of goods sold to Tackle King shall be as set out in the attached Schedule for the first six months of this agreement. Thereafter the prices shall be as agreed ~ between the parties from time to time. (b) Any increases in Designer Lures prices shall allow Tackle King to increase their margins to an acceptable level." The plaintiff contents that this clause provides for no more than an agreement to agree with no alternative basis for fixing prices after the first six months, for example, by a third party in the event of disagreement. Counsel has cited numerous well known authorities in support of the proposition 50 3 ~ ORDER -- 3 of 10 -- o 151196 T1/JAP/6 M/T 1199/96 (Lee J)' that the Courts will not enforce an incomplete contract. It - is not necessary to set them all out. Counsel for the defendant has submitted that the relief now sought should not be granted ori an interlocutory application when there are many issues outstanding, including allegations and counter all~gations between the parties as to breaches said to have been committed by each, and as clea~ly emerges from the affidavits of Perry See Hoe for the plaintiff, and Kester Dallas Atkinson and Peter David Clutton filed on behalf of the defendant. Mr Clutton was director of the plaintiff from 23 July 1994 to 27 October 1995 and apparently negotiated c=) the subject contract with the defendant on behalf of the plaintiff. It was submitted that if the declaration as sought is made the defendant will be deprived of all rights to seek 10 ,f. 20 .' equitable relief including restitution, because of expenditure 30 o () it has incurred in giving effect to the agreement. Counsel submitted that the plaintiff is estopped from asserting that there is no contract, but did not advance any specific authority for that proposition other than one hereinafter referred to. 40 Counsel for the defendant, nevertheless, submitted that the document bears several indications of an enforceable contract. It speaks of an agreement. Clearly, there can be no argument that it was other than a perfectly valid agreement and certain 50 in its operations for the first six months. Counsel for the plaintiff, of course, did not submit otherwise. Counsel for the defendant relied on clause 2; the exclusive rights clause; clause 3, restricting the defendant to sell only these lures; 4 ORDER 60 ..... -- 4 of 10 -- (J 151196 T1/JAP/6 M/T 1199/96 (Lee J)' and importantly clause 5 which provides that the lures were to - be on sold by' the defendant at set retail prices constant for the first six months but with the requirement in clause 5 (c) that the defendant should not increase the recommended retail price at any time without agreement of the plaintiff. It was said that these prices were thereby certain for the period after the first six months. Counsel also relied on the set wholesale or purchase prices for the first six months as provided in clause 4 (a) and in the schedule. It was also submitted that the document did not exclude the relationship of partnership or agency and that it was of a fiduciary character. As the affidavit of Perry See Hoe for the ~~ plaintiff states, lures were purchased on 3 August 1995, 21 September 1995 and 12 December 1995 at prices set out in the o C) schedule. This,of course, was during the first six months. However, the defendant also relies on the fact that after the first six months the plaintiff supplied to the defendant in April or June 1996, although the date is not entirely clear, 1,000 lures according to paragraph 7 of Mr Hoe's affidavit, although there is some dispute about the actual quantity. These were supplied on a contra basis. Nevertheless, Mr Atkinson in paragraph 19 of his affidavit, swears that the prices of these were calculated according to the schedule to the agreement which sets out the wholesale, or purchase price, 10 20 30 40 to the defendant as well as the recommended retail prices at 50 which they must be sold in New Zealand whichr according to the schedule, include GST. This, it was said, showed that the parties had, by their conduct, agreed on the price after the first six months for the following period. No doubt this was 5 ORDER -- 5 of 10 -- 151196 T1/JAP/6 M/T 1199/96 (Lee J) . sought to advance a claim based upon estoppel. I take this submission to' mean, in substance, that the wholesale prices in the schedules had, by agreement, been reaffirmed and determined after the end of the first six months and were to remain the relevant prices unless and until there is an agreed change. Counsel for the defendant also relied on the dispute procedure in clauses 14 and 15 to which Mr Clutton refers in paragraphs 8 or 9 of his affidavit. The actual paragraph number is not clear. It was said that when a dispute arises a notice must be given, the parties must reach agreement within a further 60 I~ days and if not so reached the agreement is discharged. ~..--} Counsel relied upon a decision of Coal Cliff Collieries Pty Ltd v. Sijehama Pty Ltd (1991) 24 NSWLR 1 and, in particular, 10 20 on the Judgment of Justice Kirby President, as His honour then 30 was, where His Honour with whom Wadell AJA agreed, held that a promise to negotiate in good faith may, in particular () ~_/ circumstances, be enforceable. Such enforceability will depend on the precise terms as construed from the particular contract. See in particular the Judgment of His Honour from 40 pages 17 to 33 and in particular at page 22 where he refers to united States of America authorities, numerous articles which bear upon this question and the law of estoppel and restitution which sometimes arises. In the result in that case it was held that the requirement that the parties proceed 50 in good faith to consult together upon the formulation of a more comprehensive and detailed joint venture agreement was too illusory and too vague and uncertain to be enforceable. 60 6 ORDER -- 6 of 10 -- o o 151196 T1/JAP/6 M/T 1199/96 (Lee J) . Counsel for the defendant before me submitted that such a difficult question should not be determined on an interlocutory basis in Chambers without a full ventilation of all of the circumstances and conduct between the parties over the period of the contract and, at least, up to date. Mr See Hoe in pa~agraph 18 states that the relationship of the parties has completely broken down and in paragraph 29 he states that the plaintiff is desirous of appointing another distributor in New Zealand. By letter of 8 July 1996 Mr See Hoe informed the defendant that he had decided to discontinue the contract, "For a second year" and will give the distribution rights to Black Magic Tackle, another organisation in New Zealand. By letter 19 July 1996 from the plaintiff's solicitors to the defendant, the plaintiff formally put the defendant on notice that, "This agreement will be terminated on 6. September 1996 10 20 30 o being 60 days from 8 July 1996 in accordance with clause 15." () That clause provides for, "Termination by explicit·non- performance" by the defendant, as the plaintiff alleges. By letter of 8 August 1996 the defendant's solicitors denied the plaintiff's allegations and the right of the plaintiff to terminate the agreement, so that there is a substantial issue. 40 There are some other matters to which reference was 50 surprisingly not made by either counsel. In clause 2, for example, there is a reference to a first right of refusal for exclusive distribution of all other products, "On terms no less favourable than those which may be offered to any other 7 60 ORDER -- 7 of 10 -- () Cj 151196 T1/JAP/6 M/T 1199/96 (LeeJ) party." If that right was taken up then the prices would have to be reasonable prices and capable of determination. Secondly, according to clause 17 of the contract the agreement is to be interpreted in accordance wit~ the law of Australia. Section 11 of the Sale of Goods Act 1896 provides as follows: "Ascertainment of Price" 11 (1) The price in a contract of sale may be fixed by the contract, or may be left to be fixed in manner thereby agreed, or .may be determined by the course of dealing between the parties. (2) When the price is not determined in accordance with subsection (1) the buyer must pay a reasonable price. (3) What is a reasonable price is a question of fact dependant on the circumstances of each particular case." One would think that this section is of considerable significance. Third, the giving of notice to end the contract by notices dated 8 July and 19 July 1996, may be regarded as recognising () the continuation of the contract after the first six months and, at least, up to 8 July 1996. 10 20 30 /-, 40 (J Fourthly in Di Lione v. Turso a decision of the Full Court of Queensland reported in [1982] QdR 224, Mr Justice Douglas held that the fact of an estoppel made certain what were otherwise uncertain clauses in the contract. That was, of course, a contract for the sale of land and was subject to finance. The ~ buyer, due to a mistake, told the vendor that finance had been approved when it had not. The vendors then incurred some small items of expense in preparation for the sale. On discovering the error the buyer informed the vendor that 8 ORDER 60 -- 8 of 10 -- 151196 T1/JAP/6 M/T 1199/96 (Lee J)' finance was not available. It was held that the buyer was , ~ estopped from alleging that the contract was uncertain. Whilst the facts of that case are, of course, quite different to the case before me, it at least supports the view that the defendant's contention should not be summarily dismissed. '. The plaintiff's ,counsel has contended that the plaintiff should not have to wait for up to two years or so depending on the exigencies of the list to have the matter of uncertainty determined at trial. But, at the same time, it is in my view quite significant that the plaintiff has by notice on 8 July and 19 July 1996 already purported to terminate the contract c=) as and from 6 September 1996 and has apparently already decided to appoint Black Magic Tackle as its new distributor in New Zealand. The plaintiff has already embarked on a course of conduct the validity of which can only be determined at trial. The point c=) of the declaration appears to be, as counsel for the defendant submits, to effectively put an end to the entire case the defendant wishes to advance to demonstrate that the contract has not been validly determined and, in particular, that it is not uncertain. If it is declared to be uncertain and void that would effectively mean that the defendant cannot assert that the contract was valid after the first six months. The granting of a declaration is a discretionary remedy. In my view, order 39 rule 12 does not assist the applicant. It does not require a declaration to be made. It merely provides that a Judge may, in certain circumstances, direct that a 9 ORDER 10 20 30 40 50 60 -- 9 of 10 -- o () o 151196 T1/JAP/6 M/T 1199/96 (Lee ~) . question can be tried separately from other issues. That is not the procepure before me; a declaration is entirely discretionary. In view of all of the foregoing on which I express no concluded opinion, I am not prepared to determined in the busy' 10 practice Court that the plaintiff is clearly right or the defendant is clearly wrong. One only has to look at the substantial material and counter material already filed to see that a final determination now is a most undesirable course. In my opinion the application for a declaration should be 20 refused. HIS HONOUR: If it appears at the end of litigation that the 30 plaintiff was right then, of course, there is an argument that the plaintiff might be entitled to costs and conversely the same with the applicant. It seems, to me, that I should reserve the costs to the trial Judge. I order accordingly. 40 50 60 10 ORDER -- 10 of 10 --