Apple and Pear Australia Ltd v Pink Lady America LLC

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT
LIST C

S CI 2014 01635

APPLE AND PEAR AUSTRALIA LIMITED (ACN 101 551 348)	Plaintiff
v
PINK LADY AMERICA, LLC	Defendant

AND BETWEEN:

PINK LADY AMERICA, LLC	Plaintiff by Counterclaim
v
APPLE AND PEAR AUSTRALIA LIMITED (ACN 101 551 348)	Defendant by Counterclaim

---

JUDGE:	CROFT J
WHERE HELD:	Melbourne
DATE OF HEARING:	24–27 August and 11 September 2015
DATE OF JUDGMENT:	10 November 2015
CASE MAY BE CITED AS:	Apple & Pear Australia Ltd v Pink Lady America LLC
MEDIUM NEUTRAL CITATION:	[2015] VSC 617 First revision: 17 November 2015

---

CONTRACT — Trademark licensing agreement — Entire agreement clause — Whether option effectively exercised other than in prescribed manner — Deed of variation altering scope of licence not formally executed — Whether deed of variation agreed by conduct —Whether purported limitation of licence constituted breach of assignment agreement — Whether purported limitation of licence constituted repudiation of assignment agreement

ESTOPPEL — Trademark licensing agreement — Estoppel by convention — Licence option not formally executed — Parties issued joint licences consistent with option terms — Parties subject to separate agreement obliging licensee to adhere to licence terms — Whether licensor estopped from denying exercise of option

INTELLECTUAL PROPERTY — Trademark licensing agreement — Trademarks assigned to recipient in consideration for licence to use trademark — Whether implied term that trademarks revert to grantor following termination of licence — Whether licence survives termination

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R.M. Garratt QC with Mr J.S. Graham	Hall & Wilcox
For the Defendant	Mr M. Wise	Arslan Lawyers

TABLE OF CONTENTS

Introduction........................................................................................................................................ 1

Procedural and evidentiary matters............................................................................................... 4

Background......................................................................................................................................... 6

Option Deed and Deed of Variation............................................................................................ 14

Operation or otherwise of the Option Deed............................................................................... 23

Was the option exercised or the clause 5.1 Licence otherwise operative?................ 23
Overview............................................................................................................... 23
Conditions for exercise of an option.................................................................. 24
Circumstances surrounding the Option Deed................................................. 29
Commercial aspects............................................................................................. 30
Deed of Variation................................................................................................. 36
Effect of the unsigned Deed of Variation.......................................................... 42
APAL’s Export Licences issued for the 2012–2014 export seasons............... 43
Commercial reality and the abandonment of contractual rights.................. 44
Admissibility of post-contractual conduct....................................................... 49

Is APAL estopped from denying the option was exercised and the clause 5.1 Licence was enlivened?.................................................................................................................................... 63

Does the clause 5.1 Licence relate only to the trademarks listed in the Schedule to the Option Deed?............................................................................................................................................ 75

Does the clause 5.1 Licence have limitations in terms of the geographical trade to which it applies?........................................................................................................................................................ 83

Does the clause 5.1 Licence include the right to sub-license?................................................. 87

Did PLA breach or repudiate the Option Deed?....................................................................... 91

Did APAL breach or repudiate the Option Deed?.................................................................... 96

Is PLA entitled to terminate the Option Deed in any event?................................................ 101

Is APAL obliged to re-assign to PLA the ownership of the trademarks the subject of the Option Deed?.......................................................................................................................................... 103

Does PLA retain a right to a clause 5.1 Licence?...................................................................... 113

Summary and conclusions........................................................................................................... 116

A...... Exercise of the Option..................................................................................................... 116
B...... The meaning and effect of the Option Deed and the clause 5.1 Licence................. 116
C...... Whether PLA breached and repudiated the Option Deed (as alleged by APAL). 117
D...... Whether APAL breached and repudiated the Option Deed (as alleged by PLA). 117
E...... Misleading or deceptive conduct (as alleged by PLA).............................................. 118

HIS HONOUR:

Introduction

This proceeding concerns questions relating to the ownership and control of “PINK LADY” trademarks in Chile and, in particular, as to the operation, meaning and effect of an option deed dated 12 June 2007 between the Plaintiff (“APAL”) and the Defendant (“PLA”). In the reasons which follow, this deed is referred to as the “Option Deed”[1] and a Deed of Variation between APAL and PLA which was not executed is referred to as the “Deed of Variation”.[2]
[1]Court Book, Apple & Pear Australia Ltd v Pink Lady America LLC (Supreme Court of Victoria, S CI 2014 01635, Croft J) 375–92 (“Court Book”).
[2]Court Book 656–84.

The trial, which has presently only been set down to determine questions of liability, raises the following questions for determination:[3]
[3]Joint Statement of Issues (11 August 2015) (citations omitted). The trial which commenced on 24 August 2015 was as to issues of liability only, pursuant to paragraph 1 of the Orders made by Croft J on 1 May 2015.

JOINT STATEMENT OF ISSUES

In this statement of issues, the plaintiff (APAL) and the defendant (PLA) list the principal matters in dispute between them, for determination in this proceeding.
A. Exercise of the Option
A.1Did APAL exercise the Option under the Option Deed expressly, alternatively impliedly, such that the licence under clause 5.1 of the Option Deed (clause 5.1 Licence) was enlivened and became operative?
A.2Is APAL estopped from denying that the Option was exercised by APAL and that the clause 5.1 Licence was enlivened and became operative?
B.The meaning and effect of the Option Deed and the clause 5.1 Licence

Issues arising on APAL’s case
B.1Upon a proper construction of the Option Deed, does the clause 5.1 Licence relate only to the use of the trade marks listed in Schedule 1 of the Option Deed, and not any other trade marks, names or devices?
B.2Upon a proper construction of the Option Deed, does the clause 5.1 Licence relate only to the use of the relevant trade marks with respect to trade in fresh whole apples and processed apples of Cripps Pink variety, and not Rosy Glow, Maslin Pink, Lady-in-Red or any other variety of apples or fruit?
B.3Upon a proper construction of the Option Deed, does the clause 5.1 Licence relate only to the use of the relevant trade marks with respect to trade in the relevant apples between Chile and North America (United States of America, Canada and Mexico), and not between any other territories?
B.4Upon a proper construction of the Option Deed, does the clause 5.1 Licence include the right to sub-license or assign any rights (and, if so, what)?
Issues arising on PLA’s case
B.5Was the Option Deed varied, from about 2008, such that the trade marks the subject of the clause 5.1 Licence came to include the “updated Flowing Heart logo”?
B.6Was the Option Deed varied, on or about 17 March 2008, such that the definition of “Products” was substituted for a new definition (as set out in an unsigned Deed of Variation—Option Deed)?
B.7Upon a proper construction of the Option Deed:
a.Was the grant of the Option by PLA to APAL made in consideration of, and solely upon terms that, in the event that it exercised the Option, APAL thereby granted the clause 5.1 Licence to PLA?
b.Does APAL’s ability to enjoy the rights as registered proprietor of the relevant trade marks assigned to it by PLA only continue for as long as APAL continued to provide to PLA the full benefit of the clause 5.1 Licence?
c.Is APAL obliged to re-assign to PLA the ownership of the trade marks the subject of the Option Deed if APAL, in breach of the Option Deed, denies to PLA the full benefit of the clause 5.1 Licence?

B.8Are there implied terms of the Option Deed that:
a.APAL would not do anything that would or might have the effect of depriving PLA of the full benefit of the clause 5.1 Licence?
b.APAL would not do anything that would or might have the effect of derogating from the grant of any of the rights conferred on PLA under the clause 5.1 Licence?
c.Should APAL, in breach of the Option Deed, deny to PLA the full benefit of the clause 5.1 Licence, APAL would be obliged to re-assign to PLA the ownership of the trade marks the subject of the Option Deed?

C.Whether PLA breached and repudiated the Option Deed (as alleged by APAL)
C.1Has PLA breached clauses 6.4(b) and/or 6.4(d) of the Option Deed, as alleged by APAL?
C.2If PLA has so breached the Option Deed:
a.Has PLA thereby repudiated the clause 5.1 Licence under the Option Deed (if enlivened and operative)?
b.Has APAL accepted the said repudiation and terminated the clause 5.1 Licence?
c.Is PLA liable to pay APAL damages (and, if so, in what amount)?

D.Whether APAL breached and repudiated the Option Deed (as alleged by PLA)
D.1Has APAL breached the Option Deed, as alleged by PLA by:
a.applying to register the updated flowing heart logo;
b.purporting to limit the geographical reach of the clause 5.1 Licence to United States of America and Mexico, and to exclude Canada;
c.asserting that the clause 5.1 Licence applies to Cripps Pink variety of apples only, and not to the Rosy Glow variety of apples?

D.2If APAL has so breached the Option Deed:
a.Has APAL repudiated the Option Deed?
b.If so, is PLA entitled to accept the repudiation and terminate the Option Deed and the clause 5.1 Licence?
c.If PLA has accepted APAL’s repudiation, is APAL obliged to re-assign the registration of the relevant trade marks to PLA, and to desist from purporting to exercise the rights of the registered proprietor of the relevant trade marks?
d.If APAL is entitled to retain its registration of the relevant trade marks, does PLA’s right to the clause 5.1 Licence continue to subsist in full force and effect?
e.Is APAL liable to pay PLA damages (and, if so, in what amount)?

E.Misleading or deceptive conduct (as alleged by PLA)
E.1Did APAL represent to PLA that, if PLA assigned its rights to the relevant trade marks:
a.APAL would grant the clause 5.1 Licence to PLA?
b.The clause 5.1 Licence would continue in perpetuity and would be royalty free?
c.Subject only to compliance with the quality control provisions, APAL would not revoke the clause 5.1 Licence or any part of it?
d.If APAL did purport to revoke the clause 5.1 Licence or any part of it, APAL would re-assign to PLA the rights to the relevant trade marks?

E.2If APAL did make the said representations:
a.Was the conduct within the extended operation of the Trade Practices Act 1974 (Cth) (TPA), by reason of s 6(3)(a)?
b.Was the conduct in trade or commerce?
c.Did PLA enter into the Option Deed in reliance on the said representations?
d.Were the said representations false and untrue?
e.Did APAL engage in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 52 of the TPA?

E.3If APAL did so contravene s 62 of the TPA, is APAL liable to pay PLA damages under s 87 of the TPA (and, if so, in what amount)?

APAL, in its submissions, addresses these issues, as does PLA, though the structure of the submissions is somewhat different. Consequently, it is most convenient—and, I think, clearer—to address these issues under a variety of subject heads then, in conclusion, to state briefly the position reached with respect to each issue by reference, whether express or implied, to these reasons.

Procedural and evidentiary matters

APAL commenced this proceeding by a writ and statement of claim dated 7 April 2014 seeking declarations as to the status and meaning of the Option Deed and the parties’ rights, as well as injunctive relief and damages. PLA has denied the claims and filed a counterclaim.

A trial as to issues of liability was conducted between 24 and 27 August 2015. The principal issues for determination were set out in the Joint Statement of Issues dated 11 August 2015 which was settled and filed by agreement between the parties in advance of the trial.[4] APAL also filed an outline of opening submissions dated 11 August 2015, and PLA filed an outline of opening submissions dated 18 August 2015.[5]
[4]See above [2].
[5]Plaintiff’s Outline of Opening Submissions (11 August 2015); Opening Submissions for Trial of the Defendant (PLA) (18 August 2015).

During the trial, PLA amended its pleading to introduce a new claim that the Option Deed was varied and, in the alternative, that the parties agreed that PLA would grant to APAL a new option (“New Option”). PLA abandoned the claim under s 52 of the Trade Practices Act 1974 (Cth) (now the Competition and Consumer Act 2010 (Cth)).

The final pleadings are:

(a)APAL’s Amended Statement of Claim dated 30 April 2014;
(b)PLA’s Second Amended Defence and Amended Counterclaim dated 25 August 2015;
(c)PLA’s Further and Better Particulars dated 25 August 2014 (served in response to APAL’s request dated 31 July 2014); and
(d)APAL’s Amended Reply and Defence to Counterclaim dated 4 September 2014.

At the trial, APAL called two witnesses, Jon Maxwell Durham and Garry Thomas Langford, each of whom provided a witness statement and was cross-examined. Mr Durham held various senior roles over numerous years with APAL and its predecessors until his retirement in October 2013. Mr Langford has held various roles at APAL and its predecessor entity since 1997, and he has been the manager of APAL’s intellectual property division since November 2010. Relevantly, they were successively the responsible officers of APAL in respect of the matters the subject of this proceeding.

PLA called three witnesses, Lynnell Brandt (the controlling shareholder of PLA), Patrick Ballew (a United States lawyer who acted for PLA and others) and Ms Gabriela Paiva Hantke (a Chilean lawyer who acted for PLA and others). Each provided a witness statement—except for Mr Brandt, who provided two witness statements—and was cross-examined. By an agreed list of objections that was tendered with the witness statements, parts of PLA’s witness statements were admitted as relevant to the witness’s state of mind only.[6]
[6]Evidence Act 2008, s 136.

In addition to the witness statements and the list of objections, APAL tendered an amended version of Annexure A to APAL’s Amended Statement of Claim dated 30 April 2014 which the parties agree is accurate,[7] and the parties tendered a number of documents from the Court Book as identified in a Consolidated Tender List dated 3 September 2015.
[7]Transcript of Proceedings, Apple & Pear Australia Ltd v Pink Lady America LLC (Supreme Court of Victoria, S CI 2014 01635, Croft J) 368 (“Transcript”).

An Amended Joint Chronology dated 4 September 2015 has been prepared and filed by the parties, with references to the documentary evidence.

I note that many of the documents relied upon by the parties contain minor discrepancies as to date or time. I accept the Plaintiff’s submission that these discrepancies are an artefact of the international dateline, across which the parties communicated at various times.[8]
[8]Transcript 43.

Background

APAL is a not-for-profit company which is the peak representative body in Australia for commercial apple and pear growers. APAL has developed and maintained the “PINK LADY” brand and an international portfolio of trademarks for apples and other products.

The “PINK LADY” brand was first used in connection with the Cripps Pink apple variety that was bred in Western Australia in the 1970s by crossing Golden Delicious and Lady Williams apple varieties. The Cripps Pink apple variety and some other apple varieties derived from it have since been developed and successfully marketed under the “PINK LADY” brand around the world. APAL is the successor in title to Australian Apple and Pear Growers’ Association Inc (“AAPGA”).

By 2007, APAL was the registered proprietor of “PINK LADY” trademarks in many countries around the world, but not in the USA and Mexico—where a US company, Brandt’s Fruit Trees Inc (“BFT”), is the registered proprietor—Switzerland or Chile. As the owner of certain “PINK LADY” trademarks in the USA and Mexico,[9] BFT has granted an exclusive licence to PLA to manage those trademarks for it. Additionally, BFT is the exclusive licensee from APAL to exploit certain “PINK LADY” trademarks in Canada (under the “Canada Agreement”).[10] BFT has held these rights since 2005. PLA is also a US company (incorporated in the State of Washington) under common ownership with BFT.
[9]Witness Statement Lynnell Brandt (23 April 2015) [18]–[20], [33].
[10]Court Book 122–97.

In Chile, Viveros Requinoa Ltda (“VR”), a tree nursery business which assisted APAL in Chile over several years, had registered two flowing heart device trademarks (“the VR marks”) and APAL and VR were in negotiations for the transfer of those trademarks to APAL. Chile is a major southern hemisphere producer of apples, and is now the largest southern hemisphere exporter of “PINK LADY” branded apples. In addition to having become a major producer and exporter of Cripps Pink apples, Chile has significant plantings of Rosy Glow apple trees.[11] The evidence is that Chile has the prospect of becoming a major producer and exporter of Rosy Glow apples.[12]
[11]Witness Statement Lynnell Brandt (23 April 2015) [55], [88].
[12]Witness Statement Lynnell Brandt (23 April 2015) [88].

APAL, BFT and VR were members of the International Pink Lady Alliance (“IPLA”), an alliance of various stakeholders in the “PINK LADY” brand worldwide which commenced in about 1999.[13] PLA became a member from June 2004.[14] Mr Durham was the inaugural chairman of IPLA and he has been involved throughout. The IPLA was established to provide a forum for key parties with interests in the international “PINK LADY” business, for the exchange of information, to assist in the development of policy surrounding the “PINK LADY” brand (to deal with matters such as royalties, quality standards and branding arrangements) and to provide recommendations to the owners of the intellectual property.[15]
[13]Witness Statement of Jon Maxwell Durham (25 August 2015) [26]. PLA and BFT resigned from IPLA in June 2010: Court Book 1185.
[14]Witness Statement Lynnell Brandt (23 April 2015) [41].
[15]Witness Statement of Jon Maxwell Durham (25 August 2015) [27].

IPLA does not itself own any intellectual property rights but under clause 4 of the IPLA Operating Agreement,[16] an agreement which was executed on 28 September 1999[17] and which was in force at relevant times, the parties agreed to meet at least every year and[18]

to establish a consistent advertising and marketing strategy for use of the PINK LADY Trademarks and the methods of selling apples under the PINK LADY Trademarks, and to establish a uniform and consistent design for all packaging used to store, ship, display, and sell PINK LADY brand apples.

[16]Court Book 40–50.

[17]Although the IPLA Operating Agreement produced is undated, a Deed of Termination of it dated 2 November 2012 recites the date of execution as being 28 September 1999 (see Court Book 1441–2).

[18]Court Book 44.

Advertising and marketing strategies were to be voted on, with a 75% vote binding on all. Clause 4 continues: [19]

Once voted upon and approved, the agreed upon strategy and packaging design shall be used by all parties to this Agreement, regardless of whether a particular party has agreed or disagreed with the approved strategy or packaging design.

[19]Court Book 44.

The recitals to the IPLA Operating Agreement recorded that: AGWA (later, the Department of Agriculture and Food, Western Australia—“DAFWA”) had developed the ”PINK LADY” trademark and had filed registrations in many countries (recital 2.2); AGWA had licensed foreign patent (ie plant variety) rights to many entities, including BFT (recital 2.3); AAPGA (later, APAL) had licensed foreign trademark rights to various entities including BFT in respect of Canada (recital 2.4); AGWA had assigned all foreign trademark rights to AAPGA (recital 2.5); and BFT owned the common law and statutory rights in the “PINK LADY” trademark in the US and Mexico (recital 2.6).

In view of the purpose of the IPLA and clause 4 of the IPLA Operating Agreement, membership of the IPLA carried with it a requirement to use “PINK LADY” trademarks (include APAL’s) in accordance with the strategy and designs resolved upon by the IPLA members from time to time for the purposes of international export trade in apples, and therefore a permission or licence in respect of such use by members of IPLA.

The principal trademark in use in trade of “PINK LADY” branded apples in 2006 and 2007 was the “PINK LADY flowing heart with kangaroo” combined device. At that time, PLA conducted its commercial activities in Chile by issuing export licences to Chilean exporters of “PINK LADY” apples using the “PINK LADY flowing heart with kangaroo” combined device.

Prior to 2006 or 2007, APAL and its predecessors had applied for, but failed to obtain, registration of “PINK LADY” trademarks in Chile.[20] Given the significance of Chile as a producer and exporter of Cripps Pink apples, APAL’s inability to obtain trademark registration of the “PINK LADY” brand in Chile had been a major issue for APAL for many years and an impediment to its ability to effectively manage the “PINK LADY” brand in Chile.[21]
[20]Witness Statement Lynnell Brandt (23 April 2015) [56].
[21]Court Book 890.

Where apples bearing the “PINK LADY” brand are exported from a territory where one party owns the trademark rights to a territory where another owns those rights, the management of those rights can be complicated. It was necessary for a seamless mechanism to be utilised to permit the trademark rights of both owners to be utilised without undue cost and trouble. The mechanism utilised was called the “Pier-to-Pier System”.[22]
[22]The Pier-to-Pier System is described at Witness Statement Lynnell Brandt (23 April 2015) [47] and is incorporated in the Option Deed in the definition of “Pier-to-Pier Licensing System” contained in paragraph 1.1 of that Deed.

In late 2006 and early 2007 PLA applied to register in Chile certain trademarks in the “PINK LADY” brand for use with the trade in apples.[23] In June 2007, PLA agreed to assign those trademarks to APAL.[24] PLA contends that it agreed to do so subject to APAL granting back to it an exclusive, perpetual[25] and royalty free licence permitting it to use, and license others to use, those marks in the export of certain apple varieties from Chile to the USA, Canada, and Mexico (these countries collectively described as “North America”).[26] PLA says that it was vitally interested in maintaining its ability to control that export channel.[27] The exclusive licence in clause 5.1 of the Option Deed was to come into operation “in the event that APAL exercises” the option. It is common ground that no “Option Notice” in the form of the Annexure A to the Option Deed[28] was signed by APAL and served on PLA. Nevertheless, it is, as contended by PLA, common ground that PLA assigned the trademark applications that were on foot, and sold for nominal consideration one trademark that had become registered to PLA, in April and May 2008.[29]
[23]Witness Statement Gabriela Paiva Hantke (28 July 2015) [9]. The applications are to be found at Court Book 201–3, 204–7, 242–3 and 487–8.
[24]The agreement was ultimately consummated as the Option Deed: Court Book 378.
[25]As to the “perpetual” nature of this licence and the context in which the word “perpetual” is used in these reasons with respect to the licence, see below [213]–[218].
[26]See Option Deed, clause 5.1: Court Book 382. In this respect, PLA contends that although clause 5.1 is stated to refer to the trade between Chile and North America (that is, trade going in both directions), relevantly for these proceedings, it is said that the trade concerned is export from Chile to North America.
[27]Witness Statement Lynnell Brandt (23 April 2015) [60], [94].
[28]Court Book 392.
[29]Witness Statement Gabriela Paiva Hantke (28 July 2015) [13].

APAL maintains that absent service of the Option Notice, the option was not exercised by APAL. It says that the assignments of the trademarks were done by PLA outside the terms of the Option Deed and unrelated to it. APAL says that, as a consequence, the exclusive licence to PLA under clause 5.1 of the Option Deed to use the Chilean registered trademarks in the trade channel between Chile and North America was never enlivened and that thus, PLA never had any rights to use the trademarks. Moreover, in all the circumstances, APAL says that the pending applications for trademarks in Chile and the prospective right to use the marks applied for under clause 5.1 of the Option Deed were of little, if any, operational value to PLA. Prior to the entry into the Option Deed, APAL says that PLA was annually licensing the export of apples from Chile under the “PINK LADY flowing heart with kangaroo” logo. The PLA export licences were, APAL says, superseded by APAL and PLA issuing joint export licences from May 2008. The joint export licences issued by APAL and PLA for the 2008 to 2011 shipping seasons were also, APAL says, voluntary permissions which related to a specific shipping season and specified fruit.[30] They did not refer to the Option Deed or to the exercise of the Option and nor, APAL says, was there any need to do so. APAL also says that whether or not PLA and APAL had entered into the Option Deed, PLA was entitled to license the export of apples from Chile using the IPLA permitted marks, and using BFT’s rights in North America.
[30]Plaintiff’s Outline of Closing Submissions (3 September 2015) [119].

Additionally, APAL says that the joint export licences stood on a different footing to the Option Deed, as is evident from the circumstance that the rights conferred on PLA, and by PLA on exporters, under the joint export licences were different in extent and character from the licence contemplated by clause 5.1 of the Option Deed. APAL says that PLA expressly eschewed any link between the Option Deed and PLA’s right to license exporters in Chile to export “PINK LADY” branded apples to North America. From 2012, APAL and PLA issued separate export licences to exporters.

A joint export licence was under discussion between APAL and PLA from early 2008. It was also then known to IPLA members—including APAL and PLA—that the IPLA would soon adopt replacement uniform trademarks which would not include national references such as kangaroos. Thus, APAL says, this meant that the “PINK LADY flowing heart with kangaroo” combined device which was the subject of PLA’s pending applications was soon to be retired. Thus, APAL says, by March 2008, the trademarks the subject of PLA’s pending applications did not have ongoing operational value for PLA, and that licence under clause 5.1 of the Option Deed did not secure for PLA rights of any practical utility.

Mr Ballew, a US lawyer and businessman, had control of PLA’s interests in the matter at hand. Mr Ballew also acted for VR in its overlapping negotiations with APAL for a Trade Mark Master Licence Agreement (the “TMMLA”) in respect of “PINK LADY” trademarks in Chile. APAL notes that Mr Ballew is married to Ms Paiva, PLA’s Chilean trademark lawyer, whose company in Chile, Global Licensing Association, Ltda (“GLA”), APAL says was also advantaged by the course that was pursued by PLA.

APAL submits that PLA’s position is that it now contends that it concluded a wider agreement with APAL, which was varied, and that—as a result of conduct by APAL in 2012 and 2013—PLA has “revoked” APAL’s rights and “taken back” from APAL the ownership, management and control of the “PINK LADY” brand in Chile, to the exclusion of APAL. APAL understands that PLA’s position is put on the basis that PLA says that there was an implied term of the Option Deed pursuant to which APAL is obliged to re-assign trademarks to PLA.

PLA makes a number of responses to APAL’s position:

(a)The facts demonstrate that the parties agreed to APAL exercising the option in a manner different to that expressed in the Option Deed, and that this Court will give effect to that exercise;
(b)In the period leading up to the assignment of the trademarks, the facts demonstrate that the parties proceeded on the basis that the assignments would be done pursuant to the Option Deed; and
(c)In the period from March 2008 until the issue of the Writ in this proceeding on 8 April 2014, APAL repeatedly and expressly stated and conducted itself on the basis that it (APAL) had exercised the option, that the licence under clause 5.1 of the Option Deed had been enlivened, and PLA conducted its affairs on the same basis. If the option was not exercised by APAL as it alleges, then a conventional estoppel arises that prevents APAL from denying that the option was so exercised.

PLA contends that on 17 March 2008, the parties agreed to vary the definition of “Products” in the Option Deed with the effect that Rosy Glow became a variety that PLA was entitled to use and to license the use of under the “PINK LADY” trademarks in the Chile–North America trade.[31] It is common ground that a document, the Variation Deed, was prepared by APAL[32] and agreed by PLA.[33] It is also common ground that the parties did not execute the Variation Deed. APAL now says that the failure to have executed the Variation Deed means that the parties are not bound by it. PLA says that the failure to have executed the Variation Deed as intended is not determinative, and the parties are bound by it, and have acted pursuant to it. PLA says that this is clear as PLA and APAL jointly for years issued export licences for the use of the “PINK LADY” trademarks for Rosy Glow apples.[34]
[31]Court Book 634–40 and 654–5.
[32]Court Book 597 and 634.
[33]Court Book 654–5.
[34]Opening Submissions for Trial of the Defendant (PLA) (18 August 2015) [105].

From early 2011, the parties fell into dispute about various matters. Relevantly, from April 2011, APAL first asserted that the Option Deed gave PLA no rights in respect of the Rosy Glow variety.[35] PLA denied that this was so.[36]
[35]Court Book 1300, 1347, 1421, 1428–30.
[36]Court Book 1307, 1409, 1424.

From about May 2013, APAL denied that PLA’s rights arising under clause 5.1 of the Option Deed extended to Canada. This was, PLA says, done by APAL’s issue of a standard form export licence for Chile for the 2013 season that excluded Canada from the definition of PLA’s Export Territories, and included Canada in APAL’s export territories.[37] PLA denies that APAL had the right to excise Canada from the reach of the clause 5.1 Licence.
[37]Court Book 1478.

The conduct of APAL in purporting to limit PLA’s clause 5.1 Licence under the Option Deed was, PLA contends, a repudiation of the Option Deed which gave rise to PLA’s right to resume ownership of the assigned trademarks.[38] APAL denies that it repudiated the Option Deed and does not plead to the allegation that it is obliged to reassign the trademarks.[39]
[38]Second Amended Defence and Amended Counterclaim (25 August 2014) [27]–[30].
[39]Amended Reply and Defence to Counterclaim (4 September 2014) [27]–[30].

Since 2008 or 2009, the IPLA, led by APAL, determined that licence-holders should move towards utilising a consistent branding throughout the world.[40] This was promoted through the production by the IPLA of a Brand Manual which set out the requirements.[41] PLA says that this requirement necessarily had the effect that, as between itself and APAL, the trademarks that the Option Deed applied to was expanded to include the updated Flowing Heart logo.[42] APAL denies that this is so.[43]
[40]Witness Statement Lynnell Brandt (23 April 2015) [97]–[109].
[41]Court Book 499–595.
[42]Second Amended Defence and Amended Counterclaim (25 August 2014) [14B(b)].
[43]Second Amended Defence and Amended Counterclaim (25 August 2014) [6].

PLA contends that since late 2013, both PLA and APAL have each acted on the basis that they are or are entitled to be the registered owners of the trademarks and to exercise all of the associated rights of the owner.

Option Deed and Deed of Variation

Before embarking upon a consideration of the specific issues raised in the Joint Statement of Issues, it is helpful to highlight a number of important provisions in both the Option Deed and the Deed of Variation.

At the outset, regard should be had to the context of the provisions of those deeds as seen by the parties and expressed in their recitals. The recitals to the Option Deed are as follows:[44]
[44]Court Book 378.

A APAL is the owner of the copyright subsisting in the Trade Marks.
B PLA has agreed to grant to APAL an option, to be exercised after a limited period of time, to acquire ownership of any Trade Marks that might ultimately issue in the Territory to APAL, subject the terms, conditions, restrictions, and grant of license rights contained herein.
CAPAL also wishes to confirm that it has licensed and will license to PLA the copyright subsisting in the Trade Marks for the purposes of:
(a)PLA applying for and obtaining registration of the Trade Marks in the Territory, and exercising ownership and control of any issued registrations for a limited period of time;
(b)PLA exercising its rights as APAL’s exclusive licensee under Trade Marks with respect to all trade between the Territory and North America, in the event that APAL exercises the Option; and
(c)to the extent necessary for PLA to fully exercise its rights, and to fulfil its obligations under this Deed.

DPLA wishes to confirm that it will immediately grant an exclusive licence to APAL regarding any rights that PLA has in the Trade Marks in the Territory, which exclusive licence shall cover all trade between the Territory and countries other than the United States, Canada, and Mexico (collectively referred to as North America).

And, as might be expected, the recitals to the Deed of Variation are more briefly cast, as follows:[45]
AAPAL and PLA are the parties to the Option Deed.
BThe parties wish to vary the Option Deed on the terms set out in this deed of variation.

[45]Court Book 658.

The particularly important provisions of the Option Deed are as follows:[46]
[46]Court Book 381–9.

2Grant of Option and Withdrawal of Opposition Proceedings
2.1Grant of Option
PLA hereby grants the Option to APAL, subject to the requirement that following the exercise of the Option that APAL continue to use a Pier-to-Pier Licensing System with respect to all trade in Products originating from the Territory as set out in clause 5.2.
2.2Withdrawal of Opposition
APAL hereby agrees to withdraw all opposition proceedings filed in the Territory with regard to any of the Trade Marks at such a time and in such a manner as will be set forth in written instructions that APAL’s Chilean counsel will receive from PLA’s Chilean legal counsel.
3Exercise of Option
3.1PLA to notify APAL
PLA must notify APAL in writing immediately after any successful grant of registration in the Trade Marks in the Territory.
3.2Exercise by APAL
APAL may, at any time during the Exercise period, exercise the Option by serving on PLA an Option Notice.
3.3Expiry of Option
If the Option is not exercised in accordance with the provisions of this clause 3 during the Exercise Period, and, unless otherwise agreed by the parties in writing, the rights granted to APAL by this Deed in relation to the Option shall immediately cease.
4Copyright Licence
4.1Grant of licence
APAL hereby grants to PLA a royalty free licence to use the copyright subsisting in the Trade Marks to the extent required for PLA to:
(a)apply to register the Trade Marks and Applications as trade marks; and
(b)use the Trade Marks and any Applications as trade marks;

in the Territory and as permitted under this Deed.
4.2Term of licence
The licence granted under clause 4.1 will:
(a)where the Option is exercised by APAL, continue for the term of the PLA Exclusive Licence as specified in clause 5.3; or
(b)where the Option is not exercised by APAL, continue in perpetuity.

4.3Acknowledgment
APAL and PLA acknowledge and agree that the copyright rights that are licensed herein are in respect of the copyright in the Territory alone.
5Trade Mark Licences
5.1PLA Exclusive Trade Mark Licence
In further consideration of the granting to APAL of the Option by PLA, and in the event that APAL exercises its Option rights under this Deed, APAL will hereby grant to PLA an exclusive licence to use the Trade Marks with respect to all trade in Products between the Territory and North America. This licence will be royalty free, and will last in perpetuity subject only to the quality control provisions contained herein. APAL acknowledges that PLA has the unrestricted right to establish and maintain a Pier-to-Pier Licensing System regarding all trade between the Territory and North America involving the Trade Marks, and that PLA has the unrestricted right to select PLA’s quality control agent in the Territory, and to direct and control the activities of the PLA’s quality control agent in the Territory provided that:
(a)the Trade Marks are used on Products which meet U.S. Fancy Grade standards or better, as currently in effect or revised from time to time;
(b)on giving seven days notice to PLA, APAL or its representatives shall have the right to inspect and view any of the Products which will be exported from the Territory association with the Trade Mark by the PLA as authorised by this clause 5.1;
(c)if APAL, acting reasonably, is of the view that any such Products do not meet the quality standards as specified in clause 5.1(a), then APAL may give notice to PLA to that effect;

(d)PLA will have 45 days from the date of the notice issued in accordance with clause 5.1(c) to ensure, to the satisfaction of APAL acting reasonably, that the Products meet the quality standards as specified in clause 5.1(a);
(e)if PLA fails (to the satisfaction of APAL acting reasonably) to ensure that the specified Product meets the quality standards as prescribed within 45 days from the date of the notice issued in accordance with clause 5.1(a), APAL may, at any time thereafter give written notice to PLA that it requires the licence granted under this clause 5.1 to terminate;
(f)if PLA does not agree that the Product failed to meet the quality standards, and the matter (“the dispute”) is not resolved within 2l days from the date of the notice referred to in clause 5.1(e), then the dispute shall be referred to mediation in accordance with the following:
(i)The dispute shall be referred for mediation in accordance with the Mediation and Conciliation Rules for the time being of the Institute of Arbitrators & Mediators of Australia to:

(A)a mediator agreed by APAL and PLA; or
(B)if APAL and PLA are unable to agree on a mediator within 14 days, a mediator appointed by the then current President of the Law Institute of Victoria, Australia.

(g)If APAL and PLA fail to resolve the dispute through a reasonable and good faith mediation effort within 60 days from the commencement of the mediation, APAL may terminate the licence granted under this clause 5.1 by giving notice in writing to PLA at anytime thereafter.
(h)Nothing in this clause will prevent either APAL or PLA from immediately commencing legal proceedings in a court in any jurisdiction for an injunction, delivery or other relief to protect its rights in relation to the Trade Marks.

5.2APAL Exclusive Trade Mark Licence
PLA hereby grants to APAL an exclusive licence regarding any rights that PLA has in the Trade Marks in the Territory with respect to all trade between the Territory and the world, except for trade between the Territory and North America which PLA reserves solely for itself. This licence is royalty free, and will last in perpetuity subject only to the quality control provisions contained herein, or APAL’s exercise of the Option. The grant of this licence is subject to the requirement that APAL put into place a Pier-to-Pier Licensing system to control the shipment of Products bearing the Trade Mark from the Territory to any countries within the European Union, including the UK, within three (3) years from the date of entry into this Deed, and subject to the requirement that APAL select and actively employ their own quality control agent (which agent may be, at APAL’s choice, the same one employed by PLA) in the Territory, provided that:
…
6Assignment of Trade Marks
6.1Terms and conditions of assignment
PLA must, within 10 Business Days from the receipt of an Option Notice, assign to APAL, free of any encumbrances, the entirety of its right, title and interest in any issued registration in the Territory of the Trade Marks and any Applications.
6.2No Warranties by PLA
APAL acknowledges that PLA’s attempt to register the Trade Marks in the Territory may not be successful, and that there may be information about the Trade Marks in the Territory that is unknown to both PLA and APAL. Therefore, APAL acknowledges and agrees that PLA makes no warranties or representations of any kind regarding the validity or enforceability of the Trade Marks in the Territory, and no warranties or representations of any kind regarding any third party claim of right to use or own the Trade Marks in the Territory. PLA does agree that it will not create though its own actions, or the actions of any person under PLA’s control, any encumbrances in or over the Trade Marks or Applications. PLA also agrees not to assign or license any rights in the Trade Marks in the Territory to any party other than APAL. And, PLA also agrees that it will have the unrestricted right and ability to assign or license to APAL, on a quit-claim basis, whatever rights PLA may have in the Trade Marks in the Territory, although APAL acknowledges that PLA may in fact have no rights in the Trade Marks in the Territory.
…
6.4Mutual Obligations of Parties
Both APAL and PLA undertake:
(a)to execute all documents and do all such acts which are necessary or appropriate to enable either party APAL [sic] to obtain their intended benefit under this Deed;
(b)not to do, or assist any other person to do, any act which would or might:
(i)invalidate or put in dispute PLA’s or APAL’s title to the Trade Marks;
(ii)invalidate, or render unenforceable, any registration of the Trade Marks in due course; or
(iii)support an application to remove the Trade Marks as registered Trade Marks in the Territory;

(c)not to oppose or cancel, or assist any other person to oppose or cancel, any application for registration, or issued registration of the Trade Marks;
(d)not to use a substantially identical or deceptively similar mark to the Trade Marks in the Territory without the written authorisation of APAL after the date of the assignment; and
(e )to provide to each other all non-privileged records in their respective possession or control in connection with the Trade Marks in the Territory. Privileged records are those records that are protected by the attorney-client privilege.

…
6.6Binding agreement
On the date that an Option is exercised, or deemed to have been exercised, pursuant to the provisions of clause 3, PLA and APAL shall for all purposes be deemed to have entered into a binding and enforceable agreement for the future assignment of the Trade Mark.
…

18 Governing law and jurisdiction
18.1 Governing law
This Deed is governed by the laws in force in Victoria, Australia.

18.2 Jurisdiction of courts
The parties submit to the non-exclusive jurisdiction of courts of Victoria including the Federal Court sitting in Victoria and any courts that may hear appeals from those courts about any proceedings in connection with this Deed.

These provisions of the Option Deed must be interpreted having regard to the definitions contained in clause 1.1 of that deed. Of particular significance are the following definitions:[47]
[47]Court Book 379–80.

APAL Exclusive Trade Mark Licence means the exclusive licence that PLA grants to APAL regarding any rights that PLA has in the Trade Mark in the Territory, solely with respect to all trade between the Territory and the world, except for trade between the Territory and North America which PLA reserves solely for itself, as is more fully described in clause 5.2.
Application means any application made by PLA for registration of a trade mark in the Territory which is:
(a)substantially identical or deceptively similar to the Trade Marks or otherwise incorporates the words “PINK LADY”;
(b)existing at the time an Option Notice is issued in accordance with 3.2; and
(c)approved of by APAL in accordance with clause 12 of the Trade Mark Master Licence;

…
Exercise Date means the date on which APAL exercises the Option in accordance with clause 3;
Exercise Period means
(a) the period commencing:
(i) 24 months from the date of registration of trade mark application no. 753.414 in the Territory, or
(ii)if trade mark application no. 753.414 is not registered, 24 months from the date of registration of trade mark application no. 760.964 in the Territory, or
(iii)if trade mark application nos. 760.965 and 753.414 are not registered, 24 months from the date of registration of trade mark application no. 770.217 in the Territory;

and ending 180 days later; or

(b)       any date that is mutually agreed to by both APAL and PLA;
Option means the right of APAL to have assigned to it from PLA, and the obligation on PLA to assign to APAL, the Trade Marks and any Applications in accordance with clause 2;
Option Notice means a notice substantially in the form of the document annexed as Annexure A to this Deed which has been executed by APAL;
Pier-to-Pier Licensing System means a system of trademark licences whereby both importing activity and exporting activity with respect to a target consuming country is licensed. For example, a Pier-to-Pier Licensing System for a trademark used with goods exported from the Territory and imported into North America would require at least the following basic licence elements:
1.        Import Licence document in place for each company that is importing the goods bearing the trademark into North America from the Territory. The Import Licence would authorize the licensed importer to receive goods bearing the trademark from any licensed exporter in the Territory.
2.        Export Licence document in place for each company that is exporting the good bearing the trademark from the Territory to North America. The Export Licence would authorize the licensed exporter to ship goods bearing the trademark from the Territory to any licensed importer in North America
3.        Quality Control Agent of the owner/exclusive licensee of the trademark in the importing country, which agent would be physically located and active in the exporting country to administer the Export Licence documentation;

PLA Exclusive Trade Mark Licence means the exclusive licence that APAL will grant to PLA regarding the Trade Marks and all trade between the Territory and North America in the event that APAL exercises the Option as is more fully described in clause 5.1, below;
Products means fresh whole apples of the Cripps Pink variety, processed apples of the Cripps Pink variety in the form of fresh cut apple slices, dried apples, apple sauce, apple cider, and apple juice, and
(a)in respect of PLA, all other related promotional goods for which either PLA or Brandt’s Fruit Trees currently have PINK LADY trademark registrations for in the United States or Mexico; or
(b)in respect of APAL, all other goods or services for which APAL currently has PINK LADY trade mark registrations for anywhere in the world;

Territory means Chile; and
Trade Marks mean the pending trade marks as set out in Schedule 1.

Schedule 1 then sets out the pending trademarks as follows:[48]

[48]Court Book 390.

Schedule 1 – Trade Marks

Trade Mark

Application No.

Class of Goods and Services

Image

PINK LADY

770.217

16

(image not available)

CHILE PINK

760.964

31

(image not available)

FLOWING HEART logo

753.414

31

[“FLOWING HEART logo” image omitted]

The critical provisions of the Deed of Variation which, as indicated previously, was not actually executed by the parties, are as follows:[49]
[49]Court Book 659–60.

2. Amendment
2.1 Amendment
On and from the Amendment Date, the Option Deed is amended as follows:
(a)the following definition is added to clause 1.1 of the Option Deed;
‘Essentially Derived Varieties means any apple varieties which are an essentially derived variety of the Cripps Pink apple variety within the meaning of the laws of the relevant territory’.
(b)the definition of Products in clause 1.1 of the Option Deed is deleted and replaced with the following definition:
‘Products’ means fresh whole apples of the Cripps Pink variety or the Rosy Glow variety, processed apples of the Cripps Pink variety or the Rosy Glow variety in the form of fresh cut apple slices, dried apples, apple sauce, apple cider or apple juice, any fresh whole apples or processed apples of varieties that are Essentially Derived Varieties of the Cripps Pink variety as agreed to by the parties in writing from time to time, and:
(i)in respect of PLA, all other related promotional goods for which either PLA or Brandt’s Fruit Trees currently have PINK LADY trademark registrations for in the United States or Mexico; or
(ii)in respect of APAL, all other goods or services for which APAL currently has PINK LADY trade mark registrations for anywhere in the world’.

2.2 Other terms
In all other respects, the terms and conditions of the Option Deed remain in full force and effect.

It is also noted that clause 12 of the Option Deed provides that “[t]his Deed may only be altered or varied in writing signed by each party” and that the Option Deed and the Deed of Variation contain an “Entire Deed” and “Entire agreement” provision in clauses 14 and 7, respectively. The Deed of Variation also provides that it is governed by the laws in force in Victoria and that the parties submit to the non-exclusive jurisdiction of courts of Victoria, including the Federal Court sitting in Victoria.[50]
[50]Court Book 389.

Operation or otherwise of the Option Deed
Was the option exercised or the clause 5.1 Licence otherwise operative?
Overview

The position of APAL is that the option was not exercised because the time for the exercise of the option had not yet arrived and, further, because no Option Notice in the form of Annexure A to the Option Deed was signed by APAL and served on PLA.

In relation to the first matter, the time for the exercise of the Option, PLA contends that the position taken by APAL in this respect ignores the provisions of paragraph (b) of the definition of “Exercise Period” as that definition appears in the Option Deed. In that definition, paragraph (a) specifies the relevant period in terms of temporal limits, but then the effect of paragraph (b) is that the period is also defined to mean “any date that is mutually agreed to by both APAL and PLA”. In a sense, this provision, or proviso, to the definition of “Exercise Period”, simply states the obvious in that, as a matter of law, it is always open to parties to transcend the provisions or requirements of an agreement between them at any time. The position of PLA is that the facts do demonstrate that the parties agreed to the exercise of the option by APAL earlier than the period stipulated in paragraph (a) of the definition of “Exercise Period”. For the reasons which follow, I accept that this is the position.

In relation to the second matter, I am also of the view that, as discussed in the reasons which follow, the conduct of the parties does demonstrate that they agreed on the Option being exercised in a manner otherwise than in strict compliance with the Option Deed. They dispensed with the requirement for APAL to serve an Option Notice and, instead, by the exchange of email correspondence, APAL called for the assignment of the trademark application to it pursuant to the Option Deed, and thereafter accepted such assignments and effected a sale and purchase for nominal consideration of the trademark that had already become registered.

Conditions for exercise of an option

It is undoubtedly true, as a general proposition, that the conditions for the exercise of an option must be strictly complied with and it is also the case that the courts will give effect to the exercise of an option that is not exercised in accordance with the manner required by the option agreement, if it is plain that the parties consensually adopted some other course. The characterisation of the process does, however, depend upon the particular circumstances because the characterisation may be that the option has been exercised or, alternatively, that the process of purported exercise resulted in a counter offer—rather than the exercise of the option according to its terms—but that the process was consummated by the production of contractual relations because the counter offer by the optionee was accepted by the optionor. These aspects of the matter are explored further by reference to the authorities, to which I now turn.

The nature of an option has been discussed in many cases and there remains argument as to the proper characterisation of an option.[51] Nevertheless, in Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd, the Full Court of New South Wales discussed the nature of an option and unanimously adopted the “irrevocable offer” view:[52]

In the present case the lessor irrevocably offered to grant a lease. Its offer prescribed the time and manner for acceptance. Only by performing the conditions prescribed could it be accepted and result in an agreement for a lease. A purported acceptance without performance of the prescribed conditions would not and could not be an acceptance of the offer. It would in reality be a counter-offer by the original offeree requiring acceptance by the original offeror if an agreement were to result. If a conditional offer is made and the offeree without performing the condition purports to accept it, that is to say makes a counter-offer and that counter-offer is accepted, it is a loose although not uncommon use of language to say that the original offeror has waived performance of the condition which was prescribed by his offer as being the manner of accepting. In contemplation of law the original offeror has done no such thing. What he has done is to accept a counter-offer and in the result an agreement is made but it is not an agreement consisting of the original offer and an acceptance of that offer.

It follows from this analysis that if an option is exercised, a new contract is created, but that the purported exercise of an option other than in accordance with the strict requirements of the option agreement constitutes a counter offer by the grantee of the option which, if accepted by the grantor of the option, gives rise to an enforceable agreement, which may or may not be an agreement in terms of the option. The terms of the agreement thus formed would, naturally, depend upon the nature of the counter offer. If the counter offer was, in a sense, merely procedural in that it involved acceptance of the option and all that would flow from the acceptance of the option according to its terms, then the agreement produced would be in the same terms as the agreement that would have been produced as a result of strict compliance with the terms of the option. It is, however, not uncommon for the purported acceptance to involve a counter offer which would, if accepted, also vary the substance of the agreement thus produced, a variation from that which would have been produced as a result of the strict compliance with the option acceptance process provided for in the option agreement. For reasons which follow, that does not, however, appear to have been the result in the present circumstances. The result of the dealings between the parties has been to produce an agreement in accordance with the provisions of the Option Deed and the Deed of Variation as though the option had been exercised strictly according to its terms.

[51]See Bradbrook, Croft and Hay, Commercial Tenancy Law, LexisNexis Butterworths (3^rd ed, 2009) [14.1].

[52](1959) SR (NSW) 122 at 123–4 (“McCaul’s Case”).

The analysis in McCaul’sCase was not doubted by the High Court in Bowman v Durham Holdings Pty Ltd,[53] a case concerning an option to purchase a reversionary interest in mineral deposits. In Bowman, the owner of an interest in coal and minerals under certain land granted an option to purchase that land which was exercisable within 12 months; which period was able to be extended by 12 months by the grantee of the option upon giving notice within a stipulated period and the payment of a sum of money. The grantee of the option did not, however, give notice in sufficient time to properly extend the option, but did pay the required sum of money for an extension. Twelve months later, the grantee of the option purported to exercise the option to purchase. The exercise of the option was rejected by the grantor, claiming defective service of the notice of exercise at that time. The grantor also alleged that there was no option available to be exercised because of the defective exercise of the notice to extend the period of the option 12 months earlier. In relation to the second aspect, the High Court held that under circumstances where:

(a) the grantor accepted and retained the payment to extend the option period;
(b)there had been long correspondence and conduct of the parties which evidenced that each party regarded the option as being on foot;
(c)that the giving of the notice to extend the option rights, although outside the time stipulated for so doing, constituted an offer by the grantee of the option to accept a new option on identical terms, which offer was accepted by the grantor of the option; and
(d)the acceptance and retention by the grantor of the option of the price for the extension of the period for exercise of the option was legally incongruous with the position it thereafter adopted that the option no longer existed.

Moreover, the position reached by the High Court was arrived at without resort to doctrines of estoppel. Similarly, in Bruner v Moore, Farwell J held that, notwithstanding that the term of an option had expired, the conduct of the parties thereafter, when they mistakenly believed it to be still on foot, was sufficient to demonstrate an agreement that the term of the option was extended.[54]

[53](1973) 131 CLR 8 (“Bowman”).

[54][1904] 1 Ch 305 at 314.

It would, of course, be remiss in discussing these issues not to mention the decision of the Victorian Full Court in BS Stillwell & Co Pty Ltd v Budget Rent-a-Car System Pty Ltd.[55] In that case, O’Bryan J said (with whom Crockett J agreed; as did Gray J, adding some further reasons):[56]

In Australia the true nature of an option to purchase and whether such an option may be expressed as an agreement to sell upon condition or an offer together with an agreement not to revoke it or as the grant of an option so called has been considered in many cases. In Gerraty v McGavin, Isaacs J said: “An option given for valuable consideration is merely an irrevocable offer, but beyond that there is no contract for a further term, unless and until the offer is duly accepted by exercising the option.”[57]
The nature of an option was also considered by Gibbs J in Laybutt v Amoco Australia Pty Ltd, particularly at pp 71–6.[58] Gibbs J concluded “that an option to purchase [in a form that the option might be exercised by notice in writing to the grantor by a specified date and by payment to a specified agent within the specified date of a specified deposit] is a contract to sell the land upon condition that the grantee gives the notice and does the other things stipulated in the option. An option to purchase, regarded in that way, is not an agreement which gives one of the parties the right to perform it or not as he chooses; it gives the grantee the right, if he performs the stipulated conditions, to become the purchaser.”[59]
In McCaul’sCase the Full Court in New South Wales was concerned with a clause in a lease granting the tenant an option to renew the lease for a further term of five years subject to the giving of three months’ previous notice in writing to the lessors, the punctual payment of rent and the due performance of covenants by the tenant. An issue arose as to whether performance of the term relating to payment of rent was a condition precedent to the tenant being able to accept the offer of renewal of the lease contained in the option clause.
The Full Court (Owen J, Roper CJ in Eq and Herron J) held that an option of renewal of a lease “is no more than an offer to make a contract”. The court said: “In the present case the lessor irrevocably offered to grant a lease. Its offer prescribed the time and manner for acceptance. Only by performing the conditions prescribed could it be accepted and result in an agreement for a lease. A purported acceptance without performance of the prescribed conditions would not and could not be an acceptance of the offer. It would in reality be a counter offer by the original offeree requiring acceptance by the original offeror if an agreement were to result. If a conditional offer is made and the offeree without performing the condition purports to accept it, that is to say makes a counter offer and that counter offer is accepted, it is a loose although not uncommon use of language to say that the original offeror has waived performance of the condition which was prescribed by his offer as being the manner of accepting it. In contemplation of law the original offeror has done no such thing. What he has done is to accept a counter-offer and in the result an agreement is made but it is not an agreement consisting of the original offer and an acceptance of that offer.”[60]
The court also determined that because the lessee was required to perform the conditions stated in the option clause before the offer to renew the lease could be accepted, performance of the conditions was the only way by which the offer could be accepted. Accordingly, non-performance of a condition could not be waived by the offeror (lessor).
McCaul’s Case was considered in the High Court in Bowman, a case concerned with an option to purchase an interest in reversion in mineral deposits under certain land.[61] Stephen J, who delivered the principal judgment of the court comprising Barwick CJ, Menzies and Stephen JJ, upheld an argument that the doctrine of waiver was inapplicable in circumstances where there is a right available to the grantee to purchase by exercise of an option but only by the observance by it of certain conditions. The correctness of McCaul was not doubted by Stephen J with whose judgment in this respect the other members of the court agreed.

[55][1990] VR 589.

[56][1990] VR 589 at 594–5. See also 603–4.

[57](1914) 18 CLR 152 at 163.

[58](1974) 132 CLR 57.

[59](1974) 132 CLR 57 at 76.

[60](1959) SR (NSW) 122 at 123–4.

[61](1973) 131 CLR 8.

Accordingly, I accept the Defendant’s contention that these cases make good the proposition that it is always open to the parties, by their words and conduct, to agree to the exercise of an option in a manner that departs from the strict requirements of the option agreement, and the resulting further agreement contemplated by the option will come into being; subject to my observations in relation to, what might be described as, an agreement which transcends procedural matters and an agreement which not only transcends matters of that kind, but also affects the substance of the agreement flowing from the exercise of the option. I also accept that this is hardly surprising, having regard to the doctrine of freedom of contract, and all the more so will a court find this result where the grantor of the option has accepted and still retains the consideration stipulated for in the option agreement, yet then disclaims that the option was properly exercised.

Circumstances surrounding the Option Deed

There are a number of circumstances leading to the preparation and execution of the Option Deed which should also be kept in mind. In particular, and of more general import, in discussions between Lynnell Brandt and Jon Durham in relation to PLA’s applications for trademarks in Chile, Mr Brandt agreed to work with APAL as long as PLA and BFT’s interests in the Chile–North America trade were protected.[62] In an email dated 1 March 2007, APAL and PLA acknowledged that PLA would be seeking to obtain the trademark rights in Chile, but APAL sought assurance that PLA would assign any such marks as issued to it.[63] In reply, Mr Brandt did not simply agree to do so but, rather, noted APAL’s request in this respect and suggested a discussion so that the interests of all concerned might be satisfied.[64] On 4 May 2007, APAL’s solicitors wrote to Mr Ballew proposing that PLA grant an option to APAL to take an assignment of the trademarks that issued in Chile.[65] On 9 May 2007, APAL’s solicitors wrote to Mr Ballew requiring the comfort of an executed Option Deed by 10 May 2007, failing which APAL would oppose PLA’s application for trademark registration in Chile.[66]
[62]Witness Statement Lynnell Brandt (23 April 2015) [60].
[63]Court Book 208.
[64]Court Book 208.
[65]Court Book 244.
[66]Court Book 252. See also Plaintiff’s Outline of Closing Submissions (3 September 2015) [47]–[56].

The email exchanges between the parties continued and, by email dated 10 May 2007, Mr Ballew wrote that “it has always been the intention of Pink Lady America and Brandt’s Fruit Trees to transfer the ownership of the Chilean PINK LADY applications to APAL at some time”.[67] It is clear, however, that, notwithstanding the statement, APAL had been unsuccessful in obtaining trademark registration in Chile until that time and that this was an impediment to the orderly management of the “PINK LADY” brand in Chile.[68] It is also clear that APAL regarded these rights as very valuable to it. Moreover, whether or not PLA was able to maintain trademark rights in Chile is not to the point. The parties believed that PLA may achieve some success in the applications in Chile, and PLA was not prepared, simply, to assign those marks without conditions. The conditions outlined in the 10 May 2007 email were that PLA retain ownership and control the application process, although the parties could agree to an early transfer by mutual consent; and that upon transfer of the trademark registrations to APAL, PLA required an exclusive licence to maintain and operate a Pier-to-Pier Licensing system in relation to the Chile–North America trade.[69]
[67]Court Book 253.
[68]Court Book 890.
[69]Court Book 253–4. The importance to PLA of having rights with respect to a Chilean registered trademark for the purpose of packaging and labeling apples in Chile is discussed below at [160]–[171]. Cf Plaintiff’s Outline of Closing Submissions (3 September 2015) [40]–[56].

The conditions put in the 10 May 2007 email were received positively by APAL’s solicitors,[70] and drafts of the Option Deed were exchanged on 10 and 11 May 2007.[71]
[70]Court Book 256, 292.
[71]Court Book 257–91, 293–309, 311–28.

APAL’s solicitors advised, on 15 May 2007, that APAL had approved the then-latest draft but that—as the Option Deed was not yet finalised—it intended to file oppositions to PLA’s trademark applications in Chile.[72] Consequently, provisions were included in the Option Deed for the withdrawal of those oppositions.[73]
[72]Court Book 331.
[73]Court Book 329.

The final version of the Option Deed was executed by APAL on 12 June 2007 and by PLA sometime before 3 July 2007.[74]

Commercial aspects

[74]Court Book 393–408 and 411.

Reference has been made to the assertion by APAL that PLA’s applications for the trademarks registration in Chile were “speculative” in nature.[75] This assertion is, however, in my view, beside the point in the present circumstances for a variety of reasons. First, it is not entirely clear what “speculative” means in this context. As the evidence indicates, a trademark application in Chile, or in any other jurisdiction for that matter, carries the risk of failure for a variety of reasons. The evidence was, however, clear that APAL had been unsuccessful in obtaining registration of the desired trademarks in Chile, whereas PLA apparently had a prospect of doing so.[76] It is also clear that APAL desired to obtain these trademark registrations in Chile and was prepared to pay a commercial price to do so having regard to the “gap” the lack of these Chilean trademark registrations created in the worldwide protection of the “PINK LADY” brand. Against this background, it is not surprising, in my view, that the terms of the Option Deed were agreed by the parties to include the clause 5.1 exclusive, perpetual and royalty free licence to PLA.
[75]Plaintiff’s Outline of Opening Submissions (11 August 2015) [29]–[34]; Plaintiff’s Outline of Closing Submissions (3 September 2015) [53], [57]–[60].
[76]See also reasons for rejection of Application No 410.558 “Pink Lady” (Sub-departamento Juridico De Propiedad Intelectual, 30 March 1999).

The inter-relationship between the assignment of the trademarks from PLA to APAL and the licence back to PLA under clause 5.1 of the Option Deed is, clearly, at the heart of the transaction. At the risk of repetition, it is helpful to set out clause 5.1 at this point:[77]

In further consideration of the granting to APAL of the Option by PLA, and in the event that APAL exercises its Option rights under this Deed, APAL will hereby grant to PLA an exclusive licence to use the Trade Marks with respect to all trade between the Territory and North America. This licence will be royalty free, and will last in perpetuity subject only to the quality control provisions contained herein. APAL acknowledges that PLA has the unrestricted right to establish and maintain a Pier-to-Pier Licensing System regarding all trade between the Territory and North America involving the Trade Marks, and …

[77]Court Book 382.

Under clause 2.2 of the Option Deed, APAL was obliged to withdraw its opposition to PLA’s trademark applications “at such time and in such manner as will be set forth in written instructions that APAL’s Chilean counsel will receive from PLA’s Chilean legal counsel”.[78] A number of emails were exchanged between the parties and their legal representatives in relation to the withdrawal of APAL’s opposition to PLA’s applications.[79]
[78]Court Book 381.
[79]Court Book 412–3, 426–9, 432–3.

Mr Durham, the Managing Director of APAL at this time in 2007, had responsibility for the conduct of the transactions. In cross-examination, he said that when Mr Ballew rang him on 5 November 2007,[80] and proposed that the assignments be made “at that time”, he knew that the assignments referred to were those that he had agreed with Mr Brandt would be made in return for a licence from APAL back to PLA.[81] Mr Durham also said that the assignments that were made were “completely consistent with the agreements” that he had reached with Mr Brandt[82] and that the agreement he had with Mr Brandt was contained in the Option Deed.[83] Mr Durham also said that the assignments were done in accordance with the agreement that PLA would assign the ownership of the trademarks and PLA would get the licence back.[84]
[80]Witness Statement of Jon Maxwell Durham (25 August 2015) [39]; Court Book 432.
[81]Transcript 225–7.
[82]Transcript 237–8.
[83]Transcript 227.
[84]Transcript 238.

Initially, Mr Durham’s evidence was that nowhere in any communication between the parties prior to the time of the assignments was there any reference to the assignments being made other than under the Option Deed.[85] He said that he had never had any conversation with PLA stating that the assignments that were to be made were otherwise than being made under the Option Deed.[86] Moreover, Mr Durham’s evidence was that the email sent on 20 March 2008 by Mr Ballew and copied to him accurately summarised the effect of the agreement that had been reached, as follows:[87]

There is an agreement in place between APAL and Pink Lady America that provides for an early transfer of the pending Pink Lady applications in Chile subject to the continued prosecution of those applications being handled by Gabriela Paiva for the joint benefit of both APAL and Pink lady America. APAL will retain an ownership interest in any registrations that issue, while Pink Lady America receives a master exclusive licence under the Pink Lady brand for all apples shipped under that brand from Chile to North America. To evidence that agreement Mr. Jon Durham executed a power of attorney in Chile on November 6, 2007, granting APAL's power of attorney to Gabriela Paiva with respect to APAL's pending trademark applications.

Thus, Mr Durham said, the agreement that had been reached with Mr Brandt had been carried out and honored, though earlier than provided for under the Option Deed, and that as a consequence the clause 5.1 Licence under that deed was active.[88] He also agreed that that is how APAL behaved thereafter.[89]

[85]Transcript 232–3.

[86]Transcript 233.

[87]Court Book 693 (emphasis added).

[88]Transcript 241.

[89]Plaintiff’s Reply in Closing (10 September 2015) [13].

Mr Durham also said that he was prepared to accept the assignments earlier than contemplated in the Option Deed because it was thought that this would enhance the prospects of success in the applications.[90]
[90]Transcript 227.

By November 2007, Ms Paiva had advised that in her view it would be appropriate for the applications to be assigned to APAL then, rather than waiting for the registrations to be completed. Consequently, by email dated 6 November 2007, Mr Ballew advised Ms Paiva, and copied in Mr Durham and APAL’s solicitor, that PLA was agreeable to assigning the pending trademark applications to APAL, provided that Ms Paiva continued the application under power of attorney from APAL.[91] On the same day, APAL gave a power of attorney to Ms Paiva to act on its behalf in intellectual property matters in Chile.[92]
[91]Court Book 434.
[92]Court Book 436.

APAL contends that this course of events is merely indicative of PLA electing to assign the trademark applications for its own unstated commercial purposes outside the purview, and otherwise than in pursuance, of the Option Deed.[93] However, I accept the Defendant’s contention that it is not apparent that there was any commercial advantage to PLA in doing so. Indeed, that conclusion flies in the face of the commercial realities. PLA held the valuable right conferred under clause 5.1 of the Option Deed and I accept that—absent some explanation for the proposition advanced by APAL—it is simply not conceivable that PLA would give up this right for no apparent reason.
[93]Plaintiff’s Outline of Closing Submissions (3 September 2015) [61]–[80]. Cf Opening Submissions for Trial of the Defendant (PLA) (18 August 2015) [43].

At this time, Mr Ballew was also acting for VR, in its negotiations with APAL regarding the TMMLA. The evidence is that there were difficulties with those negotiations, and on 3 December 2007 Mr Ballew wrote to Mr Durham regarding the TMMLA. He wrote that he could not—[94]

in good conscience recommend the assignment of the pending PINK LADY application in Chile from PLA to APAL until and unless the Master Licence Agreement between APAL and Juan Concha is finalized—because all of these relationships are linked together.

Unlike much of the other email traffic emanating from Mr Ballew, this email was not copied to his client, PLA. I accept that it is also clear that he was writing that email in his capacity as Attorney for VR. APAL submits that Mr Ballew attempted to leverage the assignment of the PLA Chilean trademark applications in his negotiations with APAL on behalf of VR. [95] However, it is not correct, in my view, to conclude that Mr Ballew’s conduct on behalf of VR can be linked or “sheeted home”, as the submissions by PLA put it.[96] The negotiations between APAL and VR are part of the background circumstances that existed at the time, but are, in my view, essentially irrelevant to the matters to be determined. Emails were exchanged in September and November 2007 in relation to the manner and timing of APAL’s withdrawal of its opposition to PLA’s pending trademark applications.[97]

[94]Court Book 443.

[95]Plaintiff’s Outline of Closing Submissions (3 September 2015) [68]–[80]. Cf Opening Submissions for Trial of the Defendant (PLA) (18 August 2015) [37]–[42].

[96]Opening Submissions for Trial of the Defendant (PLA) (18 August 2015) [38].

[97]Court Book 412, 426–8, 432, 440.

Mr Ballew’s email of 3 December 2007, to which reference has been made, seems to have stopped the assignment of the trademark applications. APAL’s solicitors wrote to Ms Paiva on 6 December 2007 that due to last minute developments she was not to assign the trademark applications until further instructed.[98] This instruction was noted by Ms Paiva.[99] On 7 December 2007, Mr Ballew wrote to APAL’s solicitors, copying in Mr Brandt and Ms Paiva.[100] The email, the subject line of which was “Option Deed Issues”, noted the failure of the Option Deed to include essentially derived varieties (“EDVs”) of Cripps Pink and noted that the parties must have intended these to be included. Mr Ballew proposed a variation deed to include these definitions of products. The second issue related to withdrawal of APAL’s opposition to PLA’s trademark applications.
[98]Court Book 446–7.
[99]Court Book 446.
[100]Court Book 448–50.

[358][1989] VR 184 at 192.

[359](1933) 48 CLR 457 at 476–7.

As has been indicated, APAL’s position is that on a proper construction of the Option Deed, there is no obligation on APAL to assign to PLA the trademarks referred to in Schedule 1 of the Option Deed. APAL contends that it should be remembered that, from the outset of the transaction, it was always the parties’ intention that APAL have the right to own the trademarks for which PLA had applied and that this was always the bargain. It says that PLA’s proposed construction would have the effect of nullifying the bargain and instead imposing a new regime which is inconsistent with it. This, of course, depends upon how one characterises the nature of the bargain, particularly whether it is characterised appropriately broadly to take into account the entirety of the real commercial considerations driving the parties and the agreement or agreements they reached.[360]
[360]See, with respect to the relevant commercial considerations, the preceding reasons, particularly [57]–[68], [86]–[90].

PLA alleges in the alternative that the Option Deed contains implied terms to similar effect, as follows:

(a)APAL would not do anything that would or might have the effect of depriving PLA of the full benefit of the clause 5.1 Licence.
(b)APAL would not do anything that would or might have the effect of derogating from the grant of any of the rights conferred on PLA under the clause 5.1 Licence.
(c)Should APAL, in breach of the Option Deed, deny to PLA the full benefit of the clause 5.1 Licence, APAL would be obliged to re-assign to PLA the ownership of the trademarks the subject of the Option Deed.

PLA pleads that the terms referred to in paragraphs (a) and (b), above, are implied by law and that the term referred to in paragraph (c) is “implied in order to give business efficacy to the Option Deed”.[361] APAL denies the allegations.[362]

[361]Second Amended Defence and Amended Counterclaim (25 August 2015) [24].

[362]Amended Reply and Defence to Counterclaim (4 September 2014) [11].

APAL contends that the terms referred to in paragraphs (a) and (b) in the preceding paragraph are reminiscent of the usual term implied by law that the parties shall do all that is reasonably necessary to secure performance of their contract,[363] and of clause 16 of the Option Deed whereby “[e]ach party agrees to do everything necessary or desirable to give full effect to this Deed and the transactions contemplated by it”.[364]
[363]See Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607.
[364]See also Option Deed clause 6.4(a): Court Book 385.

Thus, the position put by APAL is that the benefit to PLA contemplated by the Option Deed if the Option is exercised, is a right to use the Schedule 1 trademarks in respect of trade in the “Products” between Chile and North America. It says that the full benefit of the Option Deed to PLA does not entail, in any circumstances, the transfer of the trademarks to PLA. Accordingly, it is said that there is no scope for implying from the alleged paragraphs (a) and (b) terms any right to a transfer of the trademarks to PLA because that was never the intention of the parties to the contract, even assuming the perfect and complete performance of that contract. APAL submits that such a construction would offend the principles upon which terms may be implied in law, including the requirement of necessity.

In support of this position, APAL refers to Commonwealth Bank of Australia v Barker, where the High Court said:[365]
[365](2014) 88 ALJR 814 at 823 (citations omitted) (“Barker”).

29.In Byrne v Australia Airlines Ltd, McHugh and Gummow JJ emphasised that the “necessity” which will support an implied term in law is demonstrated where, absent the implication, “the enjoyment of the rights conferred by the contract would or could be rendered nugatory, worthless, or, perhaps, be seriously undermined” or the contract would be “deprived of its substance, seriously undermined or drastically devalued”.[366] The criterion of “necessity” in this context has been described as “elusive” and the suggestion made that “there is much to be said for abandoning” the concept. Necessity does, however, remind courts that implications in law must be kept within the limits of the judicial function. They are a species of judicial law-making and are not to be made lightly. It is a necessary condition that they are justified functionally by reference to the effective performance of the class of contract to which they apply, or of contracts generally in cases of universal implications, such as the duty to cooperate. Implications which might be thought reasonable are not, on that account only, necessary. The same constraints apply whether or not such implications are characterised as rules of construction.

APAL also observes that although the implication of a term ad hoc and the implication of a term as a matter of law are distinct concepts, they are both founded on necessity and tend in practice to “merge imperceptibly into each other”, as, it says, was affirmed by French CJ, Bell and Keane JJ in Barker in the preceding paragraph to that which is set out above.[367] Thus, APAL contends, there is, accordingly, no basis for distinguishing the observations of the High Court in the above paragraph on the basis that the Court was dealing with an implication as a matter of law in Barker as, it says, the opening submissions of PLA appear to suggest.[368] In light of these submissions, it is, in my view, important to consider precisely what the High Court did say in that immediately preceding paragraph; which, accordingly, is now set out:[369]
28.An implication in law may have evolved from repeated implications in fact. As Gaudron and McHugh JJ observed in Breen v Williams,[370] some implications in law derive from the implication of terms in specific contracts of particular descriptions, which become “so much a part of the common understanding as to be imported into all transactions of the particular description.“ The two kinds of implied terms tend in practice to “merge imperceptibly into each other“. That connection suggests, as is the case, that the “more general considerations“ informing implications in law are not so remote from those considerations which support implications in fact as to be at large. They fall within the limiting criterion of “necessity“, which was acknowledged by both parties to this appeal. The requirement that a term implied in fact be necessary “to give business efficacy” to the contract in which it is implied can be regarded as a specific application of the criterion of necessity. The present case concerns an implied term in law where broad considerations are in play, which are not at large but are not constrained by a search for what “the contract actually means”.

In my view, when regard is had to the actual statement made by the Court in this paragraph, the criticism by APAL of the PLA submissions with respect to Barker fall away. In any event, I will come to the PLA submissions in this respect in due course.

[366](1995) 185 CLR 410 at 450, 453.

[367](2014) 88 ALJR 814 at 823.

[368]Referring to Opening Submissions for Trial of the Defendant (PLA) (18 August 2015) [120].

[369](2014) 88 ALJR 814 at 823 (citations omitted).

[370](1996) 186 CLR 71.

APAL also makes reference, in support of its contentions in this respect, to Codelfa Construction Pty Ltd v State Rail Authority of NSW, where Mason J said:[371]

The more detailed and comprehensive the contract the less ground there is for supposing that the parties have failed to address their minds to a question at issue.

[371](1982) 149 CLR 337 at 346.

I turn now to the third term sought to be implied, that is, the term to which reference is made in paragraph (c), as set out above. APAL contends that if such a term is to be implied in fact, as PLA alleges, it must derive from the Court’s view of the objective intention of the parties and it must satisfy the conditions for the implication of a term in fact in order to give business efficacy to a contract. The conditions relevant in this respect are as follows:[372]
[372]See BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 at 283; Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 347.

(a)The term must be reasonable and equitable;
(b)The term must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it;
(c)The term must be so obvious that “it goes without saying”;
(d)The term must be capable of clear expression; and
(e)The term must not contradict any express term of the contract.

These conditions are, as the authorities indicate, stringent[373] and cumulative, and they import different considerations.[374] APAL says that the pleaded term does not satisfy these conditions. In particular, it is submitted that the pleaded term does not satisfy the requirements that the term must be reasonable and equitable, that it be necessary, that it be so obvious that it goes without saying and that it does not contradict any express term of the contract.

[373]Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32 at 68.

[374]Grocon Constructors (Victoria) Pty Ltd v APN DF2 Project 2 Pty Ltd [2015] VSCA 190, [140].

In relation to whether the term is reasonable or equitable, APAL submits that the termination of a contract for breach does not put the parties back in the position they would have been in if the contract had not been made, let alone in a better position as, it says, this implied term would do for one party only. APAL says that PLA’s applications were speculative and opposed by APAL. APAL withdrew its opposition and the applications were conducted on its behalf. APAL says that it is not reasonable or equitable to imply a right on the part of PLA to ownership of trademarks for which PLA had only a speculative, opposed claim, to the detriment of the opponent who bore the cost of the applications and whose superior title to the trademarks had effectively been conceded in the recitals to two previous agreements between them. These submissions are addressed more fully in this context and in other contexts in these reasons but, for present purposes, it suffices to say that this is to take a very narrow view of the commercial context of the discussions and negotiations and agreements between the parties and significantly overlooks the position that it was most unlikely indeed that APAL could itself have achieved trademark registrations in Chile having regard to its past history with Chilean trademark authorities. Also, it is difficult to know what significance any assertion that trademark applications are speculative has in the present context as it is clear from the evidence that it would be common ground that all parties would and did take the view that there was no guarantee of success in the Chilean trademark applications made by or on behalf of PLA; but that is of no significance, as indicated elsewhere, in the present context.

APAL also submits that the term is not necessary to give business efficacy to the contract. In this respect, it says that PLA had no need to have title to the trademarks in order to enjoy the licence under clause 5.1. It says that PLA was able to enjoy the full benefit of the Option Deed, duly performed without any breach, without obtaining title to the trademarks. Moreover, it says that in the event of breach by APAL, there were curial remedies of specific performance and injunctions to compel APAL to perform its part of the agreement.[375] Again, the commercial context is discussed elsewhere, as are these submissions.[376]
[375]As is consistent with advice given to PLA by its Australian counsel, which was referred to by Mr Ballew in his email dated 7 December 2007: Court Book 448–9.
[376]See above [57]–[68].

APAL says that the term is not so obvious that it “goes without saying”. It says that the licence granted by clause 5.1 proceeded on the basis between APAL and PLA that APAL held the title which permitted the grant of the licence, and there were adequate curial remedies to ensure performance of the bargain. Accordingly, APAL says, it is not obvious at all that in the event of breach APAL should forfeit the trademarks to PLA. Again, these matters are considered elsewhere.

Finally, APAL submits that the term contradicts express terms of the contract. The express term of the licence identified in this respect is that PLA would receive a perpetual licence. APAL says that the premise of this term, in the circumstances, was that APAL would hold the title to the trademarks indefinitely. It is said it would be inconsistent with the licence if the performance of the contract at any point should entail PLA acquiring title to the trademarks. As discussed elsewhere, this is, in my view, a conflation on APAL’s part of two distinct circumstances; the circumstance where PLA is being allowed to enjoy the full benefit of the clause 5.1 Licence and the circumstance where this is not the case. In the latter circumstance, the argument is, of course, that the deed does not deal with this in a manner consistent with the commercial considerations to which reference has been made.

PLA agrees in its submissions that the law on the implication of terms in contracts is uncontroversial and says that the statement in some identified paragraphs of APAL’s Outline of Opening Submissions of those principles is adequate, although some care must be taken with the quoted passage in the Barker case.[377] PLA submits that the requirements for the implication of these terms are adequately made out. In my opinion, this is the position, for the preceding reasons and for the reasons which follow in relation to some of the specific issues raised in this context. Before turning to the specific terms, it is helpful to consider some more general matters with respect to the provisions of the Option Deed.
[377]The paragraphs in the Plaintiff’s Outline of Opening Submissions (11 August 2015) are [110], [112]–[114]. These paragraphs are reflected in the Plaintiff’s Outline of Closing Submissions (3 September 2015) [212], [214]–[218]; as discussed in these reasons, above at [196]–[200].

It is apparent from the plain words of clause 5.1 of the Option Deed that the assignment of trademarks was done in consideration of the clause 5.1 Licence. It is apparent from the terms of the Option Deed that PLA was prepared to assign to APAL the commercially valuable right to the trademarks in return for the ability to protect the trade from Chile to the territories in which it was the trademark holder of the “PINK LADY” brand. That is the evident commercial purpose of the transaction for both parties, as has been discussed elsewhere in these reasons. Similarly, whether or not PLA had the ability to obtain the trademarks concerned is not to the point. If it did so, these were very valuable rights for APAL. So much so that it gave the perpetual and royalty-free licence sought by PLA.

The parties also agreed that they would do all such acts which are necessary or appropriate to enable either party to obtain their intended benefit of the Option Deed.[378] This is a statement of the duty on all parties to a contract to cooperate to ensure that the contract is performed. If any authority for this proposition were to be required, reference is made to the general duty of cooperation implied in every contract, as articulated by Lord Blackburn in Mackay v Dick:[379]
[378]See clause 6.4 of the Option Deed: Court Book 385.
[379](1881) 6 APP Cas 251 at 263.

[A]s a general rule, where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect.

Similarly, the High Court said, in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd that:[380]
It is not to be thought that this rule of construction is confined to the imposition of an obligation on one contracting party to co-operate in doing all things necessary to be done for the performance by the other party of his obligations under the contract. As Griffith CJ said in Butt v M’Donald:[381]
It is a general rule applicable to every contract that each party agrees, by implication, to do all things as are necessary on his part to enable the other party to have the benefit of the contract.

One aspect of a duty of cooperation is that a party must not act so as to hinder or prevent the fulfilment of the other party’s purpose.[382]

[380](1979) 144 CLR 596 at 607.

[381](1896) 7 QLJ 68 at 70–1.

[382]Shepherd v Felt & Textiles of Australia Pty Ltd (1931) 45 CLR 359 at 378.

PLA submits that the Court should construe this clause as prohibiting either party from doing anything that would prevent the other party from obtaining the intended benefit under the Option Deed. It says that the constructions contended for by PLA are the corollary of the duty not to do anything to deprive PLA of the benefit of the clause 5.1 Licence. Moreover, PLA submits that if it is correct that the quid pro quo in the Option Deed was that the assignment be made on the basis of the perpetual licence to PLA under clause 5.1, then upon a breach by APAL of the duty not to render part or all of that licence nugatory, then the apparent basis for APAL to continue to enjoy the benefit of the assignment must fall away. Under those circumstances, it is contended that the proper construction of the Option Deed requires that in those events, APAL would be obliged to re-assign the rights to PLA.

APAL criticises the pleaded form of the implied term in paragraph (c), as set out above, in that it refers to the “full benefit” of the clause 5.1 Licence. It says that the pleaded terms are not “necessary” as explained in Barker.[383] In response, PLA says that, first, the use of the words “full benefit” adds little. The word “full” could be deleted and the implied term would lose nothing. The words “full benefit” are appropriate insofar as, in the case of the clause 5.1 Licence, the trade concerned was between Chile and the United States, Mexico and Canada. For APAL to deprive PLA of the benefit of the clause in relation to one of those territories, it would be, and in my view, clearly, depriving PLA of “the benefit” of the Licence and of the “full benefit” of the Licence. Secondly, PLA submits that it is evident from the judgment in Barker, particularly from paragraph 28 of the judgment, the paragraph immediately preceding the paragraph 29 quote from Barker set out in APAL’s submissions, that the discussion was in relation the requirement of “necessity” as a criterion for the implication of a term in a contract by operation of law, rather than an implication in fact based on the presumed intention of the parties. As indicated previously, I accept that this is the correct analysis of these parts of the judgment of the High Court in Barker.
[383](2014) 312 ALR 356.

More specifically, in relation to the pleaded terms as set out in paragraphs (a) and (b), they are, as PLA contends, no doubt necessary in the relevant sense. Recalling that the clause 5.1 Licence was granted in perpetuity, to deprive PLA of, for example, one of the territories in which it can ply the export trade using the trademarks would or could seriously undermine or drastically devalue the rights conferred on PLA under the contract. As PLA says, the rendering of the terms as relating to the “full benefit” of the contract recognises the nature of the clause 5.1 Licence.

Additionally, the term sought to be implied by PLA as set out in paragraph (c) does, in my view, adequately meet the requirements for implication of a term in fact. At the time of the contract, APAL recognised that if PLA could obtain registration of the trademarks, this would present a valuable asset for it. If PLA could obtain the registrations, then APAL wanted them. PLA said that it would only agree to assign them to APAL if APAL provided an exclusive licence to PLA to use those trademarks in the trade between Chile and North America in perpetuity and royalty-free. In my view, it is quite clear that if the officious bystander had said to the parties, “Well, if APAL later deprives PLA of its licence, surely APAL cannot keep the trademarks?”, both parties would have agreed. PLA would do so as the trademarks are the price it paid to obtain the licence, and APAL would, because it would be legally incongruous and unconscionable for it to have taken the benefit, but then refused to pay the price, which in this case is the provision of the licence in perpetuity. Further, PLA would not have agreed to the assignment if APAL had dissented. Additionally, all this is in the context of the commercial considerations which are referred to in these reasons, particularly that there seemed little or no prospect of APAL itself obtaining these trademark registrations in Chile.[384] Consequently, there is nothing unreasonable or inequitable about the term pleaded. It is unreasonable and inequitable for APAL to retain the trademarks without providing the licence to PLA.
[384]See above [83]–[91].

Does PLA retain a right to a clause 5.1 Licence?

PLA contends that if the Option Deed has been terminated and APAL is entitled to retain the Schedule 1 trademarks, then PLA holds a clause 5.1 Licence as “a fully accrued right … under the Option Deed such that it continues”.[385]
[385]Opening Submissions for Trial of the Defendant (PLA) (18 August 2015) [152].

APAL submits that when a contract is discharged for breach or on acceptance of a repudiation, it is discharged as to its future operation only, and rights acquired unconditionally thereunder at the point of discharge are not divested, as the passage from Dixon J in McDonald v Dennys Lascelles Ltd indicates:[386]

Both parties are discharged from the further performance of the contract, but rights are not divested or discharged which have already been unconditionally acquired. Rights and obligations which arise from the partial execution of the contract and causes of action which have accrued from its breach alike continue unaffected.

APAL submits, however, that the conclusion for which PLA contends does not follow, for a number of reasons. First, it says that the licence is not a property right which has a separate existence apart from the contract which confers it, such as might be said, for example, in respect of an accrued right to payment for work done under a contract of employment. Secondly, it says that the Option Deed shows that the enjoyment of the permission which is the licence is conditional on the continuing observance of the conditions referred to in clause 5.1. Thirdly, APAL contends that this, as a consequence, is not an accrued right, such as a right to payment, fully formed once and for all regardless of whether the contract from which it derives continues to subsist. It is, by contrast, it is said, a permission which subsists only for so long as the contract which governs it continues to subsist. Fourthly, it is said that being a contractual right of a personal nature[387] which arises from day to day, it is a right which the Option Deed contemplates is terminable[388] and so is not acquired once and for all time in perpetuity when the option is exercised.

[386](1933) 48 CLR 457 at 476–7.

[387]See clause 11.1 of the Option Deed: Court Book 388.

[388]Clause 5.1(g) of the Option Deed: Court Book 383.

PLA’s position is, as indicated, that if the Option Deed has been terminated, either by PLA’s conduct constituting an acceptance of APAL’s repudiation or by PLA’s repudiation, which PLA denies, having been accepted by APAL and if it is found that APAL is entitled to retain ownership of the trademarks, then the clause 5.1 Licence was a fully accrued right of PLA under the Option Deed such that it now continues.

This position is further reinforced by the provisions of clause 10 of the Option Deed, which contains a “no merger” clause. In the passage of Dixon J in McDonald v Dennys Lascelles Ltd quoted above,[389] his Honour had in mind in that case not simply that a party has a right to damages, as that is encompassed by the reference to “causes of action which arise from its breach”. Rather, his Honour had in mind other rights that a party has acquired by means of partial execution of a contract. Those must be accrued rights.
[389](1933) 48 CLR 457 at 476–7. See above [215].

The question whether a right is accrued such that it survives termination for repudiatory breach is a matter of construction of the contract concerned.[390] In this case, PLA has paid the price to acquire the perpetual licence under clause 5.1. The price was paid by the assignment of the trademark and the trademark applications to APAL. By that partial execution, it acquired the clause 5.1 Licence. In this respect, the words of the licence are very important:

This licence will be royalty free, and will last in perpetuity subject only to the quality control provisions contained herein.
[390]Photo Production Ltd v Securicor Transport Ltd [1980] 1 AC 827 at 842–3.

The words of the licence indicate that there is only one basis upon which the licence may be brought to an end. This is reinforced by clause 5.1(g), which explicitly gives APAL the right to terminate the clause 5.1 Licence in that event. That is for failure to comply with the quality control provisions contained within it. In my view, these matters are sufficient to indicate that the parties’ intention was that, once enlivened, the clause 5.1 Licence could not be brought to an end, except in that one circumstance. Consequently, as a matter of construction, the clause 5.1 Licence survives termination of the Option Deed. Considerations of this kind, namely as to the proper construction of the Option Deed do, in my view, indicate that the more general provisions, such as clause 11.1, which is relied upon by APAL, are not significant in this circumstance as they are, in my view, not inconsistent with the position contended for by PLA and, further, to the extent that they might be ambiguous as to effect, in this context would—if given the significance which APAL seeks to give them—be at odds with the commercial considerations to which reference has been made.
Summary and conclusions

As foreshadowed in the earlier part of these reasons, the position I have reached in relation to the agreed statement of issues is as follows:[391]
[391]The footnote references to the preceding parts of these reasons are particular references only as with respect to many of these issues the whole or other parts of the preceding reasons are also relevant.

A.       Exercise of the Option
A.1     Yes and, in the alternative, impliedly.[392]
[392]See above [44]–[91].
A.2     Yes.[393]
[393]See above [107]–[128].
B.       The meaning and effect of the Option Deed and the clause 5.1 Licence
Issues arising on APAL’s case
B.1      No.[394]
[394]See above [129]–[148].
B.2      No.[395]
[395]See above [150]–[159].
B.3      No.[396]
[396]See above [150]–[159].
B.4      Yes.[397]
[397]See above [160]–[171].
Issues arising on PLA’s case
B.5Unnecessary to decide as the issue is not one of variation but one of construction; because as a matter of construction the clause 5.1 Licence does include the updated Flowing Heart logo.[398]
[398]See above [129]–[149].

B.6      Yes.[399]
[399]See above [70]–[76], [79]–[80].
B.7      Upon a proper construction of the Option Deed:
a.        No.[400]
[400]See above [57]–[64].
b.        Yes.[401]
[401]See above [192]–[213].
c.        Yes.[402]
[402]See above [192]–[213].

B.8      Are there implied terms of the Option Deed that:
a.        Yes.[403]
[403]See above [209]–[213].
b.        Yes.[404]
[404]See above [209]–[213].
c.        Yes.[405]
[405]See above [211]–[213].
C.Whether PLA breached and repudiated the Option Deed (as alleged by APAL)

C.1 No.[406]
[406]See above [172]–[180].
C.2 If PLA has so breached the Option Deed:
Not applicable.
D.Whether APAL breached and repudiated the Option Deed (as alleged by PLA)

D.1     Has APAL breached the Option Deed, as alleged by PLA by:
a.        Yes.[407]
[407]See above [181]–[188].
b.        Yes.[408]
[408]See above [181]–[188].
c.        Yes.[409]
[409]See above [181]–[188].

D.2     If APAL has so breached the Option Deed:
a.        Yes.[410]
[410]See above [185]–[188].
b.        Yes.[411]
c.        Yes.[412]
d.        Yes.[413]
e.Not applicable at this stage as the trial has only proceeded in terms of liability issues.

E. Misleading or deceptive conduct (as alleged by PLA)
These claims are not pursued.

[411]See above [189]–[192].

[412]See above [192]–[213].

[413]See above [214]–[218].

The parties are to bring in orders to give effect to these reasons. The question of costs is reserved and I will hear further submissions from the parties in relation to this issue.

Further directions will be made for the conduct of the remainder of the trial in this proceeding and I will hear the parties accordingly.

Trade Mark	Application No.	Class of Goods and Services	Image
PINK LADY	770.217	16	(image not available)
CHILE PINK	760.964	31	(image not available)
FLOWING HEART logo	753.414	31	[“FLOWING HEART logo” image omitted]

[2015] VSC 617

10 November 2015