Ballast Stone Estate Wines v Wine Solutions Australia PL

[2007] SADC 129

DISTRICT COURT OF SOUTH AUSTRALIA

(Civil)

BALLAST STONE ESTATE WINES v WINE SOLUTIONS AUSTRALIA PL

[2007] SADC 129

Judgment of His Honour Judge Tilmouth

6 December 2007

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - IMPLIED TERMS - DURATION OF CONTRACT

The plaintiff sues under several heads of damage for premature termination of agreement - discussion of legal principles regarding the implication of a term requiring termination on reasonable notice and the length of such term - claim allowed in part - three months notice held to be required in the particular circumstances.

Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337; Woolworths (SA) Pty Ltd v Basetone Pty Ltd (2006) 95 SASR 174, applied.
Balfour v Balfour [1919] 2 KB 571; Harvey v Facey [1983] AC 552; Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256, considered.

BALLAST STONE ESTATE WINES v WINE SOLUTIONS AUSTRALIA PL
[2007] SADC 129

Wine Solutions

1. Wine Solutions Australia Pty Ltd (“Wine Solutions”) carries on business as distributors of wines. At relevant times to these proceedings, this was a highly competitive market, compounded by a large over supply of wine.

2. By June 2002 Andrew Beavan (“Mr Beavan”) had spent two years working for Beringer Blass as a sales manager. He began planning to establish his own wine distribution business in conjunction with a Mr Van Ruth (who later went on to pursue a career overseas) and a Mr Martin Kay.  Kay at that time also worked for Beringer Blass as accounts manager. Together they developed a draft business plan before the company was incorporated on 1 July 2002.[1]  As it happens, Mr Kay left Wine Solutions to become sales manager with the other party in this action, Ballast Stone Estate Wines (Reg.) (“Ballast Stone”) in late 2003.  There is no evidence this occurred in adverse circumstances or that either he or Mr Beavan were disaffected.  

   [1] Transcript 207 L11.

3. At that stage they enjoyed what appears to have been an informal and cordial relationship with Skye Cellars, who assisted them with storage and some distribution.  The business plan proposed the main line of distribution for South Australia and in the Northern Territory.  They planned to develop “buyers own brands” as quality alternatives to mass produced house wines for its customers.[2] 

   [2] Exhibit P5 Document No. 36.

   Wine Solutions involvement with Ballast Stone

4. Although Ballast Stone had grown grapes for a number of years, its first vintage was 2001.  The Shiraz turned out to be particularly good.  Ballast Stone is essentially operated by the Shaw family.  They started in humble circumstances at McLaren Flat around 1975.  Through hard work and enterprise, their operations expanded and are now substantial.  They acquired holdings at Currency Creek in 1995 and in 2001, bought just under 1,000 acres and Currency Creek Estate Wines. All told they now have in the region of 1,250 acres under vine.

5. Mr Kay was a friend of a Mr Mazzacatto of Skye Cellars.  It appears that Mazzacatto also knew the wine maker of Ballast Stone, Mr John Loxton.  Loxton was previously chief wine maker of Maglieri wines.  Maglieri was coincidentally owned by Mildara Blass.  Mazzacatto discussed the proposal to form what became Wine Solutions on three occasions in early June 2002.[3]  He introduced them to Ballast Stone on Friday 7 June 2002 at Skye Cellars.  Mr Beaven and Mr Van Ruth were present.  Also present were Mr Loxton and Mr Mark Shaw for Ballast Stone.  Mr Shaw was one of Ballast Stone’s directors.  On all accounts the respective sides were complete strangers to each other until then, although Beaven knew of Loxton.

   [3] Exhibit D8.

   An agreement for wine distribution is formed

6. Discussions commenced with the previous twelve months trading. Ballast Stone then retained Empire Liquor Distributors to market its wine and they succeeded in selling something short of one hundred cases.  Ballast Stone, being disappointed, was looking for a new distributor. There were aspirations of selling six to eight hundred dozen cases over the following twelve months, expressed at this initial meeting. 

7. Those present on Wine Solutions side thought this was “realistic, if not conservative”.[4]  They desired a long-term distribution agreement for the South Australian and Northern Territory markets, of five years to be reviewed every six months.[5]  There is no doubt that at this meeting an agreement was formed, appointing Wine Solutions as Ballast Stone’s exclusive distributor for South Australia.  There are however significant differences as to what other terms attached to the core distribution agreement, if any.

   [4] Exhibit P5 Document No. 38.

   [5] Exhibit P5 Document No 38.

8. Following this meeting, Wine Solutions developed a proposal to market Ballast Stone wine under a special brand name conceived by Wine Solutions, “Stone Mason”.  This was seen as Ballast Stone’s exclusive “buyers own brand” for distribution through the “Sip ‘N Save” network, of one hundred and thirty retail outlets or thereabouts.  The concept “Ballast Stone” derives from historical connections between the Currency Creek and Goolwa areas with ships from Europe carrying ballast, left behind after being loaded with local cargo, going back to the 1850’s. “Stone Mason” was meant to extend the same theme.  At all events Wine Solutions commenced marketing Ballast Stone Wines, including Stone Mason.  Quite a deal more wine was sold by them than had previously been the case. 

   Ballast Stone severs relationship with Wine Solutions

9. No formal agreement was ever drawn up.  Matters came to a head of sorts, in August 2004, during a meeting held near the Kent Town offices of Wine Solutions, at the Tin Cat Café.  Mark Shaw and his brother Nathan were present, along with Mr Beaven and his partner, Jill Bauer.  Substantial areas of disagreement emerged, following robust discussions, to be detailed later in these reasons.

10. As a consequence, Wine Solutions forwarded a draft distribution agreement to Ballast Stone.[6]  This proposed an “exclusive distributorship” for a term of five years pertaining to the Ballast Stone wine and ten years pertaining to the Stone Mason brand, with automatic renewal for five years.  Payment was to be made within ninety days of shipment.  Termination was provided for on breach. 

    [6] Exhibit P5 Document No 29 and Exhibit P6 Document No 6.

11. Ballast Stone responded with a draft of its own, one in appreciably different terms.[7]  Of note were provisions suggesting a term “commencing as soon as it is signed … for an initial term ending 31 December 2005”, termination on ninety days notice, and payment within sixty days of shipment.[8]  In addition a program for the staggered payment by Wine Solutions of outstanding indebtedness then said to stand at $47,393.85, (schedule 2) was proposed.

    [7] Exhibit P6 Document No 7.

    [8] Clauses 3.1, 2 and 14 respectively.

12. This proved quite unacceptable to Wine Solutions.  In a subsequent meeting with Mr Shaw at Wine Solutions’ office, Mr Beaven told him so.  Shaw replied “that’s all we are offering”, according to Mr Beaven.  Mr Beaven pointed out that the proposed arrangement was only as good as a three month contract in view of the termination provision.  At that point according to Mr Beaven, the parties “agreed to disagree”[9] even though Ballast Stone was “very happy” with the sales generated by Wine Solutions.[10]

    [9] Transcript page 56 L10.

    [10] Transcript page 231 L9.

13. On 10 November 2004, that is two or three weeks after the meeting in the Kent Town office, Ballast Stone though its solicitors served a notice of termination on Wine Solutions and made a demand for the payment of $93,954.11, said to remain owing on account of wine supplied.[11]  The notice presupposes an agreement, but does nothing to inform by way of content. 

    [11] Exhibit P6 Document No 8.

14. Mr Beaven responded in a letter of 15 November 2004 expressing the view that the parties could still reach a “mutually satisfactory resolution of all matters”, that Wine Solutions were entitled to at least ninety days notice before termination, suggested they had been dealt with in a “pre-emptory manner” and made other demands for the payment of money said to be owed to Wine Solutions, including “export promotional work” of $36,639.99 and $45,640.12 “for loss of profit we will suffer and for royalties”.[12]  An attempt was made to settle their differences on the payment to Wine Solutions of just under $7,000,[13] an offer otherwise of no other than historical probative significance.  Further exchanges between both sides followed on 16 and 17 November.[14]

    [12] Exhibit P6 Document No 9.

    [13] Exhibit P3.

    [14] Exhibit P6 Document No 10, Exhibit P6 Document No 11.

    The dealings between the parties

15. The notes of the meeting of l7 June 2002 at Skye Cellars, clearly do not purport to be exhaustive or contain references to all that was said.  Indeed they simply comprise a number of heads of discussion.  Insofar as any agreement goes, no concluded distribution terms emerged.  If any such terms were mutually agreed, they are not reflected in the notes.  So far as relevant to the present discussion, those notes read: [15]

    [15] Exhibit P5 Document No 38.

    WINE SOURCE MEETING

    7 June 2002 at 2:00pm

    Present:         Andrew Beaven (AB), Richard van Ruth (RvR), John Mazzacato (JM)

    Also Present:  John Loxton (JL) and Mark Shaw (MS) from Ballast Stone Estate

    Apologies:     Martin Kay (MK)

    Ballast Stone Distribution in SA

    ·    Currently Distributed by Empire Liquor.

    Sales YTD less than 2 pallets, which is unacceptable for Ballast Stone.
    Looking for new distributor.  JM has long relationship with John Loxton and has   indicated new distribution company being formed which may be interested in agency.

    …

    ·    JL and MS gave overview of Ballast Stone Estate history, current production and potential for growth. 

    Looking for 600-800 dozen from new distributor in first year.  Agreed by RvR and AB to be realistic, if not conservative.

    ·    RvR and AB gave overview of the reasons for setting up our own company, and of the desire we have for forming long lasting relationships with our principals.

    …

    ·    RvR and AB request a distribution agreement to be formed for SA/NT market.  MS and JL agree, provided sales targets etc are included.  AB and RvR agree and are keen to set a 5 year plan for the brand, which will be reviewed on a 6 monthly basis.

16. The first meeting was followed up by a second at Ballast Stone’s Currency Creek winery, on Saturday 15 June 2002.  It was preceded by a tour of the winery and no doubt, some tasting of the range of wines then in production.  There is a record relating to this occasion, in as much as an email was sent summarising discussions, the following Monday by Joan Ashenden, then a cellar-door attendant with Ballast Stone.  It refers, amongst other things, to obtaining the Empire Liquor distribution list and using Stone Mason as a “second label” at a supply cost of $50 - $55 per dozen for white wines and at around $60 - $65 per dozen for red wines.[16]  The main significance of this meeting appears to be that Wine Solutions distribution rights were mutually understood to include the Stone Mason range. 

    [16] Exhibit P5 Document No 6.

17. Wine Solutions proceeded to prepare a proposal for the marketing of Stone Mason by means of an exclusive agreement for distribution through the retail chain Sip ‘N Save.  It appears to have envisaged a “three way” agreement.  The proposal was, in material put:[17]

    [17] Exhibit P5 No. 46.

    SIP N’ SAVE PROPOSAL
    EXCLUSIVE HOUSE BRAND WITH
    BALLAST STONE ESTATE WINES
    20 June 2002

    THE BRAND

    “Stone Mason” by Ballast Stone Estate Wines

    The Shaw family have been grape growers since 1975, when Richard and Marie planted five acres in the foothills of McLaren Vale, South Australia.

    Their dream was for family involvement, so they set about finding an ideal location for expansion.  The Ballast Stone winery was established in 2001 at Currency Creek, and utilises the premium quality fruit both regions produce.

    …

    AGREEMENT

    ·    Exclusive rights to the brand for 2 years

    ·    Guaranteed pricing for the term of agreement

    ·    All outlets to agree on and adhere to pricing structure

    ·    Wines to be included in Sip N Save Core Range with outlets to stock a minimum of two wines

    ·    All stock to be distributed via SALD, with no price over rides or discounts.[18]

    [18] “SALD” is a reference to SA Liquor Distributors Ltd.

18. A further sales and distribution proposal was developed and dated 25 July 2002.  This particularised so far as relevant:[19]

    [19] Exhibit 5 Document No 7.

    STONE MASON

    Objectives

    ·Create exclusive house brand for Sip N’ Save Liquor Group to be utilized both on and off premise

    ·Emphasize exclusivity by including principals of Sip N’ Save in discussions on the formation of the label and allowing input into wine style

    ·Formulate signed contract for 2 year commitment at a guaranteed price with first option to renew for additional 2 years

    Actions

    ·Organised two meetings with John Paschke, Field Operations Manager, and Michael Shelley, Group Manager, to discuss Stone Mason proposal

    ·Upon approval, WSA will visit all 130 retail outlets presently under Sip N’ Save banner to explain and promote the Stone Mason concept

    ·Provided labelled sample bottles for final tasting by Sip N’ Save committee to be held Tuesday 30 July 2002

    ·Concept agreed to in principle by Sip N’ Save management

    Potential Results

    ·5000-6000 cases budgeted sales for 2002-2003 as brand is established (Chardonnay, Cabernet Sauvignon, Shiraz)

    ·Planned introduction of second white varietal (Sauvignon Blanc) and a sparkling wine in the second year

    ·In 12 months, estimated budget of 12,000 – 15,000 cases

    ·Create proposal for use of Stone Mason label interstate and overseas.

19. This proposal was discussed at a meeting between the parties on 25 July 2002. This meeting raised the export potential for Ballast Stone Wines,[20] and so far as Wine Solutions intended, the formulation of a signed contract for two years as well as a proposal for interstate and overseas distribution.[21]  It emerged from the evidence that this “buyers own brand” was to be launched into the market during the first week of October 2002.  In the meantime, Ballast Stone lodged the registered trademark “Stone Mason” on 3 July 2002.[22]

    [20] Exhibit P5 No 47, a note not contained in another version Exhibit P4 No. 7.

    [21] Ibid.

    [22] Exhibit D14.

20. Two meetings followed between the parties and Sip ‘N Save executives around late June or early July, when the Stone Mason wines were sampled, re-blended and ultimately approved by Sip ‘N Save.  It became clear Sip ‘N Save wanted an agreement direct with Ballast Stone, to the exclusion of Wine Solutions, because of a previous experience with Grants Whiskey over which they had “their fingers burnt”.[23]  Although remaining less than happy about this, Wine Solutions reluctantly recognised, in the words of Mr Kay that “we were looking at the bigger picture of getting the case up and running … [we] … always felt like we were going to be alright with it”.[24]

    [23] Transcript 1068 L30 and Transcript 745 L8-L16, Transcript 749 L13 – L18, Transcript 1036 L14 – L20.

    [24] Transcript 1069 L10 – L20.

21. The wine distribution agreement between Ballast Stone and Sip ‘N Save was executed on 24 September 2002, for a fixed term of two years “plus any further term of 2 years” at the instance of Sip ‘N Save on written notice seeking “subsequent terms of similar duration”, failing which terms were automatically extended for a further period of 2 years.  Termination was permitted for cause.  The agreement further acknowledged Ballast Stone’s ownership of the intellectual property “associated” with the “Stone Mason range of wines”.

22. These loose arrangements as between the two current parties continued in that state for some months until Wine Solutions presented a “sales and marketing proposal” on 10 May 2003,[25] designed to “maximise exposure among consumers” and in order to “develop a long-term premium Australian wine brand in the competitive United States Market”. Key elements relating to “export structure” were:[26]

    [25] Exhibit P4 No 17.

    [26] Exhibit P4 No 45.

    BALLAST STONE ESTATE WINES
    EXPORT
    SALES AND MARKETING PROPOSAL
    10 MAY 2003

    Actions

    ·Schedule and implement two to three market development trips annually to coincide with AWB tastings and important wine events.

    Support required from Ballast Stone Estate Wines

    To support WSA’s efforts in the trade, maximise exposure among consumers and create pull through, WSA encourages BSEW to contribute additional items for promotional campaign

    ·Support Materials – BSEW to provide support materials such as logo and product shots for importers and distributors.

    ·Promotional Displays – BSEW to provide header cards, flyers, aprons, waiter’s friends, etc…

    ·Winemaker visits – Winemaker/Principal to schedule one annual visit for market support.

    Export Structure

    …

    ·BSEW may utilise export license for shipment.

    ·BSEW may invoice importer/distributor directly.

    ·In lieu of an additional mark up, to drive competitive prices and volume sales, WSA will accept $12.50 per case (less than half the normal agent margin), built into the FOB price, on export orders.  See Price Escalation Schedule.

    ·BSEW to cover the airfare, accommodation and selected expenses for 2-3 market visits for one representative annually.  WSA will assume responsibility for additional visits or representatives.  The expenses will be shared among export partners, i.e. additional wineries.  WSA will not represent more than one winery per region in the United States.  Estimated annual expense, not including EMDG reimbursement, when shared with one partner, $15,000.

23. There is no evidence in writing, or to be inferred from any written exchange between the parties, of an acceptance by Ballast Stone of these or of any other export proposals. They simply remained as proposals.  In the words of Mark Shaw “it needed more work”,[27] “it wasn’t very clear”[28] and “it was pretty well left open”.[29]  Wine Solutions did not identify any potential sales at this time.[30]  However it did manage to persuade an American wine distributor based in Colorado to visit Ballast Stone’s winery, some time in the week commencing 14 September 2003. It appears he dined with various representatives of both sides at Currency Creek.

    [27] Transcript 785 L1.

    [28] Transcript 786 L26.

    [29] Transcript 788 L17.

    [30] Transcript 787 L21 – L23.

24. In between time, another meeting took place this time at Wine Solutions’ Kent Town office in August 2003.  A passage from the evidence of Mr Beaven in relation to this is quoted later.  It suffices for the present to observe the issue of Wine Solutions’ entitlement to a royalty for conceiving the “Stone Mason” idea, was first raised on this occasion.

25. The parties met again on 27 November 2003, as noted in an e-mail sent the following day by Mark Shaw to Mr Beaven.  Shaw advised “Ballast Stone is committed to increasing its focus on bottled wine sales in South Australia”.[31] With respect to the United States market the e-mail contained:

    The US situation was discussed.  BSEW has received strong interest from a US importer/distributor and feels it is necessary to give consideration to a proposal which they will be submitting.  We requested WS submit a similar detailed proposal for the US covering Import, distribution and volume projections for BS and SM brands.  We estimated the time for the proposals to be finished and reviewed would be approximately 2-3 months.

    The importance in moving the Stonemason brand in the US was discussed, BSEW has 15,000 case (sic) 03 shiraz and 30,000 cases 03 Cab Sauv ready to move into the US.

    Until a discussion on the proposals has been made BSEW will be unable to take orders for the US.

    I trust this clearly represents a discussion, if anything is out of order please let me know.

    No such proposal was received. 

    [31] Exhibit P4 No 5.

1. Ballast Stone began to redirect its marketing strategy, and by early December appointed Nathan Shaw as Export Director. Beforehand he was vineyard manager at Currency Creek.  He began to review expert procedures and policies.  In an e-mail to Mr Beaven of 5 December 2003 Ballast Stone advised:[32]

   Nathan has advised me that you will not be involved with any exporting projects in the near future and that you will be concentrating on domestic sales for Ballast Stone Estate Wines.

   [32] Exhibit P4 No 29.

2. The American based wine distributor John Beatty, through his firm Best Connect, communicated by means of an e-mail dated 16 December 2003 (US time) with Wine Solutions, expressing certain requirements of the domestic retail wine market in his country.  He also expressed significant reservations: [33]

   [33] Exhibit P4 No 30.

   We have been reviewing the numbers (costs) and trying to figure out where the exchange rate is headed, because this is starting to have a significant impact.  I gather that some of the major Australian wineries still have some hedging left, although also also [sic] hear that they are starting to run out, so the cost impacts will start to be seen, which will be new territory.  Starting new winer (sic), we have no hedging in place, and so need to watch exchange rates closely.  I am expecting 2004 to be a challenging year due to exchange rate impacts.

   This is going to make marketing and promotion particularly critical, and what I need to be assured of is that the wineries are committed to building a market share for their wines, and are willing to make an investment in doing so.  As I have discussed with Jill, and as Jill is very aware, time in the marketplace from the wineries or those closely associated, such as you guys at Wine Solutions, is very important.  We are also working hard to develop new avenues, particularly creative ways, to access consumers more directly.  With its multi-tiered system, it is very important for the winery and us as importer to have someone out there pushing the brands day in and day out.  We are working to build our rep network for this purpose, but if the wineries are serious about building a presence in the USA (and here I am talking about Di Giorgio and Ballast Stone, rather than smaller wineries like Penna Lane), we need to have someone focussed on each brand nationally.

   I need to also be upfront about the biggest issue, which is getting the wines established with distributors.  We have shown them to our current distributors, but have not received an enthusiastic response, largely because the wines fall into the price point where it takes a lot of hard work to build a brand image sufficient to get the wines moving off the shelf.  Unfortunately, the big disservice that Yellow Tail has done is that all of the distributors want the next Yellow Tail, and they don’t want to invest the time and energy to build a new mid level brand in a saturated market.

   . . .

   With this as a context, I am very concerned about the price levels based on the current exchange rates.  We have found a lot of resistance at these levels, and the volumes are on the low side.  The pricing as we see it, based on .78c exchange rate are as follows (please check the pricing – obviously, the better the pricing, the more we can move, so if there is any room to move, we need to know that, whether volume based or otherwise):

   . . . 

   Ballast Stone

   We need to see the latest iteration of the label design to make a decision.  I haven’t seen anything that incorporated the changes we discussed when I visited.

   When I was in Australia, we discussed three options – option 2 would be the starting point, but we would look at the following, which we would draw down in several draws:

   NV Sparkling Pinot Chard  64 cases

   NV Sparkling Shiraz 150 cases

   02 Petit Verdot – 500 cases

   02 Merlot – we would essentially pass on this unless we can get real interest

   02 Shiraz – 500 cases

   02 Cabernet – 250 cases

   As a start, we would take 1 pallet of each on the initial order, with a re-order coming once we are able to get numbers established with distributors.

   I haven’t had the chance to share this with my crew, and we need more information from the wineries.  We really want to err on the side of conservatism than risk ending up with wine that moves slower than we expect – we’d rather run short and allocate while we build the market.

   I would appreciate feedback from Jill, Andrew and yourself, and will email you separately on Penna Lane.

3. Mr Beaven described this particular communication as amounting to an “indicative order”,[34] but this was clearly wishful thinking on his part.  The e-mail was as exploratory as it was prospective.  The course of events ultimately led to a meeting at Wine Solutions’ Kent Town office on 2 February 2004.  Nathan Shaw explained Ballast Stone was changing its “focus from big grape growers to try and grow their bottle sales from 10% to 1/3 of their business” and intended “keeping all exporting in-house”.[35] 

   [34] Transcript P81 L8, P82 L3, P84 L3-L7, P92 L34, P535 L31-P586 L15.

   [35] Exhibit P4 No 6.

4. By then Wine Solutions had made no significant advances into the interstate market place.  There were various discussions with a number of retail chains, including Flinders Wine and ILG Wine groups for instance, but all advances fell short of clinching any deals, either because Wine Solutions failed to have interstate people “on the ground” or because the “price point” was simply too high. 

5. Ballast Stone considered the trial had failed, in the words of Mark Shaw:[36] 

   QAt that stage was the one-year period that you’ve given in the discussions you’ve told us a moment ago, early in the piece – one year to establish sales elsewhere; was that of any concern to you, that time period.

   AYes, it was.

   QWhy.

   AWe were looking at Stonemason as our second tier wine.  We were happy with sales through Sip ‘N Save in South Australia.  We were frustrated that nothing seemed to be happening in the other States, and I guess we could see time slipping away and we wanted to resolve those issues.  If we could make a go of something, then make a go of it or, if not, let Wine Solutions know that the time’s up.

   [36] Transcript 792 L10 – L24.

6. Wine Solutions on the other hand maintained the right to “a royalty on the Stone Mason range”, an assertion Shaw agreed to “look into”.  In notes of this meeting kept on Ballast Stones’ side, that Jill Bauer “is to submit her expenses for the work she has done on our behalf and Nathan will hand it to the Management Meeting”.  The note then continued:[37]

   Andrew said that they had been discussing Stonemason since 2002 and that he had been promised an agreement/royalty for being involved with Stonemasin since its inception.  They can keep it domestically because it has lots of potential to be a big seller, however, there seems to be a lot of loose ends which need tidying up.

   . . .

   On closing, Andrew recapped that the Stonemason name and concept was discussed at a meeting in June 2002 with Mark Shaw, John Loxton and Marty Kay in attendance and Andrew is of the understanding that there was a royalty set up.  Please look into this.

   [37] Exhibit P4 No 32, (Andrew being Mr Beaven).

7. The evidence was that Nathan Shaw immediately checked with his brother Mark and Mr Loxton concerning the issue of a royalty.  He ascertained that no such question was raised previously.  Wine Solutions’ response was to render an invoice, for the first time, dated 5 February 2004, said to be “export expenses incurred by Jill Bauer” between January and October 2003.  It charges 30 hours per week at $45 per hour ($58,050) in addition to expenses, such as airfares, accommodation and delivery, in all $73,279.97,[38] 50% of which it allocated to Ballast Stone, namely $36,639.99, “GST included”.  This is obviously one of two sums mentioned in Mr Beaven’s letter of 15 November 2004. 

   [38] Exhibit P4 No 33a.

8. No evidence was proffered as to whether any other winery was invoiced or contributed to these costs.  The attached supportive documentation, included credit card and airline records in the name of Jill Bauer, personally.  No primary records were produced then, or received into evidence, indicating Wine Solutions’ legal liability for these expenses. 

9. The response of Ballast Stone, in material part came by letter of 5 April 2004:[39]

   The Directors have met and confirmed that it was agreed that expenses relating to work undertaken by Wine Solutions on the export market was going to be adequately covered over time by a concentrated effort to support Wine Solutions in the South Australian domestic market.  You and I have subsequently agreed that this would be the case.  In addition, we believe that the invoice you have submitted is not in accordance with any agreements we have made with Wine Solutions.  I can therefore confirm this invoice will not be paid by Ballast Stone.

   . . .

   Rest assured that we value the relationship domestically with Wine Solutions and look forward to significant growth in the next 12 months.  Please do not hesitate to contact me should you wish to discuss this.

   [39] Exhibit P4 No 34.

10. Despite the closing sentiments of this last correspondence, the working relationship between both parties deteriorated rapidly thereafter, as one can readily glean from the contents of Mr Beaven’s letter of 20 April 2004: [40]

    The proposals were discussed in great detail in meetings in Adelaide or at the winery and approved by Mark leading us to move forward in good faith with both Stonemason and export on behalf of Ballast Stone.  We had requested written confirmation many times but to date we have received no correspondence from Mark or Ballast Stone.  To date the only materials we received from Ballast Stone were the minutes from our meeting in February, which I have also enclosed.

    All Wine Solutions staff regularly kept Mark apprised as to the progress of export, including travel, events and tastings, telephone conversations with importers/distributors and samples required in the United States.  Please understand, Wine Solutions allocated many hours and invested considerable expenses with the understanding that Ballast Stone was fully aware and in agreement with out efforts to achieve an export order.  As such, three separate trips were made to correspond with AWB tastings in New York, San Francisco and Seattle and to have a presence at additional key wine events in the US such as the Food & Wine Magazine Classic at Aspen.

    In addition, Wine Solutions shipped dozens of samples to the US – we were given every indication by Mark that Ballast Stone was 100% supportive of our actions.  We took no action without consulting Mark.

    These events culminated in August 2003 with the dinner meeting at Currency Creek with John Beatty, our importer.  Discussions over dinner included availability of current vintages, release of new vintages, export timing and quantities, suitable varietals for the US, label modifications and feedback from the many tastings conducted in the US by Jill Bauer and John Beatty.  As you may recall, at this meeting Mark organised various barrel samples of new vintages for John with an understanding that an order would follow.

    Following John Beatty’s return to the US, he organised orders with his team and distributors and an order for Ballast Stone wines was placed through Wine Solutions to Ballast Stone.  I believe you have that order on file however we can provide you with a copy if necessary.  It was our agreement with Mark that expenses incurred on behalf of Ballast Stone in the US would be settled once an order was placed, our incentive to obtain an order.

    Our first contained order from Best Connect primarily consisted of Ballast Stone Estate wines, with a second container to follow soon after.  Considering the huge influx of Australian wine into the US market, and the competitive nature at the price point, this is a significant achievement.

    At our meeting in February, when you announced that Ballast Stone had recently changed its focus and would no longer be included in our marketing efforts in the US, you invited us to submit our account for services rendered which we promptly submitted.  We believe the account was more than fair and only reflects our costs for time and expenses based on our good working relationship with Ballast Stone.  There is no allocation for additional marketing efforts undertaken by Best Connect to establish distribution/distributors, effectively pre-selling the wine, in key states prior to placing the order.

    As you are aware, as consultants engaged for market research and marketing, these expenses are fully claimable/refundable by Ballast Stone under Austrade’s Export Market Development Grant scheme.

    [40] Exhibit P4 No 35.

11. This letter, co-incidentally, captures the essence of the case for Wine Solutions in these proceedings.  No order of the kind referred to in this letter was proved in evidence.  Nor was there any proof of “a second container to follow soon after”.  The highest the evidence went on that topic was the e-mail from Mr Beatty quoted extensively above.

12. By mid 2004 negotiations reached an impasse.  The parties met at the Tin Cat Café.  No minutes or notes were kept on this occasion. However there is a consensus between the parties as to the subject matter of discussion and that no resolution or solution resulted.  In summary, Wine solutions was unhappy that it had not been paid for its invoice rendered in February, remain dissatisfied over being left out of the Sip ‘N Save contract, as to the on-going irresolution over distribution rights and the associated issue of royalties.

13. The Finlayson letter of termination mentioned “longstanding issues relating to the consultancy services”, that “the commercial relationship is not sound” and “the distribution arrangements must come to an end.”[41]  It insisted on the return of all Ballast Stone and Stone Mason wine held by Wine Solutions.  Wine Solutions refused.  There is no evidence of the quantity held at this time.  

    [41] Transcript P60 L8.

    Legal proceedings are issued

14. Matters came to a head upon Ballast Stone issuing proceedings out of this court on 19 December 2004 claiming $93,954.11 for wines sold to Wine Solutions between November 2003 and October 2004.  No doubt before service was effected, Mr Beavan wrote to Finlaysons on 20 December 2004:[42]

    Our losses of profit from expected sales for the three month notice period is based on our annual sales of 3000 cases of Stonemason wines and 2000 cases of Ballast Stone wines.

    1.     Stonemason 58 cases per week at $18 per case, for 3 moths - $13,500.00

    2.     Ballast Stone 38.5 cases per week at $40 per case, for 3 months - $20,000.00

    In all $33,500.00

    Your client can easily verify the turnover.

    As to royalties on sales of Stonemason wine outside South Australia, we are aware of sales in Victoria, NSW, WA, Queensland and 10 countries.  Sales since launch in those areas total about 40,000 cases, which puts the royalty at $200,000.00 to date.  Mark Shaw offered us the royalty in recognition of our involvement as set out in our earlier letter.

    [42] Exhibit P6 No 22.

15. Wine Solutions went to trial on a counter-claim, under six identified heads of alleged damage.  The first claims $1,184.70 for “sample claims”, the second $2,810.72 by way of reimbursement of funds paid to SA Liquor Distributors (the “SALD” claim), the third $350,000 damages pursuant to an alleged agreement to pay a royalty of $5.00 for every case of wine sold outside South Australia (the “royalty” or “Stonemason” claim), a fourth $36,639 (the “Export” claim), a fifth claiming $67,000 damages for premature termination of the distribution agreement (the “loss of profits” claim) and finally a claim for $13,399.73 for the “Desktop publishing” claim.  The question of damages under the royalty and loss of profits heads were postponed by consent of both parties, pending resolution of the other heads of claim and of liability under those heads.[43] 

    [43] Transcript 114 L38 – 116 L31.

16. It should be mentioned at this point, that judgment was entered pursuant to Rule 51.07 of the District Court Rules 1992 by a Master of this court on 1 November 2005 in the sum of $80,349.39 in favour of Ballast Stone against Wine Solutions, based on admissions in the latter’s defence, a judgment stayed pending the outcome of this trial.  When the matter came to trial, the proceedings related entirely to the substantial counter-claim by Wine Solutions; the relatively minor remnants of Ballast Stones’ claim were abandoned.  In effect the plaintiff became defendant and vice-versa.

    The nature and content of the agreement between the parties

17. The focus of the evidence presented at the trial related to the content of the agreement between the parties. There was no complaint concerning the failure to supply wines, either in terms of quality or quantity or of the effectiveness of sales and distribution by Wine Solutions locally.  It was the inability to successfully market interstate and overseas that became the genesis of emerging differences.  For the first year from the time Stone Mason was launched into the market place on 1 October 2002 until late November 2003, relations continued very much as a matter of good faith on both sides with respect to local sales and giving Wine Solutions a reasonable chance of extending sales into the other markets.

18. Whilst there is no contest that an agreement was formed, the evidence was not so clear as to the precise contractual relationship at all, apart from that of supplier and distributor.  The heads of damage reflect the contention that other terms were agreed as well.  Of course, as to those, an intent to create legally binding relations must be proven by Wine Solutions: Balfour v Balfour[44] as well as offer and acceptance: Harvey v Facey,[45] Carlill v Carbolic Smoke Ball Co[46] and The Crown v Clarke.[47]

    [44] [1919] 2 KB 571.

    [45] [1893] AC 552.

    [46] [1893] 1 QB 256.

    [47] (1927) 40 CLR 227.

19. The evidence-in-chief of Mr Beaven including the following, in context of the very first meeting at Skye Cellars of 7 June 2002, was:-[48]

    [48] Transcript P35 L33 - P36 L3.

    AThe discussion, as I remember, went Mark Shaw suggested that in the previous year they'd only sold 100 cases through Empire Liquor, I think, and that we would be the new distributors.  We would have exclusive rights to sell Ballast Stone wines within South Australia, with the exception, I might add, of that general area around Currency Creek which is an area that they would look after themselves which makes sense and we certainly agreed to that.

    His evidence continued in relation to the terms of the agreement reached:-[49]

    QHow did that agreement take place.  Was there a meeting at which they said “Yes, we want you to do it” or you said to them, “Yes, we will do it”.

    AWe put together a proposal, which is part of our documents, as a distribution proposal and mentioned exclusive rights to selling their wines in South Australia and Northern Territory.

    QAnd that was a written proposal, is it.

    AWritten proposal.

    QWas there then written acceptance of that or verbal acceptance of that.

    AVerbal acceptance.

    [49] Transcript P37 L29 – P38 L2.

20. When pressed for a definitive time and place when verbal acceptance occurred, he proved to be very elusive:[50]

    [50] Transcript 271 L6-L23.

    QJust a minute.  Please just answer my question.  On that basis, on what you have told his Honour is an agreement, the agreement could not arise from your proposal, could it. 

    AThere was an agreement there, a well understood agreement which we talked about on a regular basis.

    QJust a moment.  A moment ago you said to us that the agreement was your proposal, do you remember that.  You said you put a proposal and it was agreed to.

    AA proposal - 

    OBJECTION: MR STRAWBRIDGE OBJECTS

    QDo you recall saying to his Honour a moment ago that you gave a proposal that Mr Mark Shaw accepted verbally and that was the agreement, do you remember saying that.

    AYes.

    QI'm now suggesting to you that that agreement, if it is an agreement doesn't cover the items on this invoice.  Can we at least agree that that is where we got to.

    AYes.

    QSo, I'm putting to you there must be some other agreement where you say my client took on a liability to pay for these expenses, is that right. 

    AA verbal agreement, yes.

    QWhen was that made. 

    AIt was discussed weekly - regularly.  It was never covered at one particular time or - it was just discussed regularly with Mark about how we were moving forward with export again. 

    And again later:-[51]

    QWhat I want to know is - the agreement was made and, as I understand it you're saying the agreement that you can recall being present - discussed by you and by others who were present - in August 2003 I think you said it was with Ms Ashenden, Mr Shaw and yourself - Mr Loxton -

    AThere was another meeting along with a lot of other meetings we'd had to update Ballast Stone about how we were traveling with the export business.  The agreement –

    QMy question to you was, have I got the right meeting, in effect; am I dealing with the right meeting –

    AYou've got one of the right meetings.  There's lots of meetings. 

    [51] Transcript 273 L6-279 L35.

1. The fact of the matter is that one searches in vain through the evidence of Mr Beaven, for identifiable times, places or terms upon which binding agreements were formed going beyond a basic distribution agreement.  Time and time again he expressed himself in terms “we agreed to move forward”,[52] but that evidence does not inform the content of any agreement or identify its terms.  His evidence was unsatisfactory in many respects particularly when he was pressed on the agreed term.[53]

   [52] Transcript 229 L 21, T 299 L26, T326 L35, T382 L16, T426 L26, T431 L17, T467 L15, T474 L9 – L14, T502 L27, T526 L34, T548 L24, for example.

   [53] Transcript 377 L14 – Transcript 384 L12.

2. Mark Shaw accepted the formation of a distribution agreement to “use … (Wine Solutions) … as the agent” after it was not included as part of the Sip ‘N Save deal,[54] and his brother equally accepted “it was going to be a long-term distribution”.[55] 

   [54] Transcript P747 L29-P748 L2.

   [55] Transcript 964 L7.

3. In this state of the evidence it is not possible to make any finding other than that there was an agreement by Ballast Stone to allow Wine Solutions an exclusive right to distribute its wines in South Australia (and possibly in the Northern Territory).  No fixed term was really discussed in concrete terms and certainly none was mutually agreed.  The various proposals put forward by Wine Solutions may have well amounted to an offer, to which no acceptance at any time is proven on balance.

4. The course of the correspondence quoted above demonstrates that the respective minds were never at one on the terms of arrangement.  In fact as time went on they appeared to grow further apart.  Doubtless Mr Beaven held expectations that their relationship might endure for so long as the Sip ‘N Save arrangement continued, however there was hardly any discussion along those lines, let alone a definite meeting of minds.  The situation was, as Mr Kay said, that they moved forward feeling that things would work out “alright”.  It was one in the early part built upon high expectations and mutual trust, but little else of a formal nature.

5. The only other form of arrangement between the parties it is possible to identify, is one permitting Wine Solutions the opportunity to sell wines interstate and overseas for a trial period of approximately twelve months.  Once again no other fixed terms were agreed.  The probabilities are that this would continue for approximately twelve months and then be reviewed.  The evidence does not lead to the conclusion that this part of the relationship was open-ended, as it was in the case of local distribution.

   Can or does the law imply any other term?

6. Given these findings, it appears the contract of distribution was bare indeed.  This conclusion gives rise to questions of termination and how that might be lawfully achieved, in the context of such loose arrangements.  It is clear, following the decision of the High Court of Australia in Codelfa Construction Pty Ltd v State Rail Authority (NSW),[56] that terms may be implied in order to give “business efficacy” to a contract.  In this instance no fixed term was agreed for the duration of distribution rights into South Australian and the Northern Territory, no date of expiration and no mechanism for termination were discussed or agreed. 

   [56] (1982) 149 CLR 337.

7. The principles to be applied in determining if and when it would be appropriate to imply a term into a contract, in the context of contracts for an indefinite periods, were surveyed in some detail by Gray J in Woolworths (SA) Pty Ltd v Basetone Pty Ltd.[57]  This is no occasion to repeat them.  It is enough to observe, expressed in general terms, that a court will imply terms when necessary to give business efficacy to the contract, when the term is both reasonable and equitable, is so obvious “it goes without saying”, and is both capable of clear expression and does not contradict an express term: Codelfa.[58]When it comes to the specific question of implying termination on reasonable notice, attention is directed to subject matter, the circumstances in which the contract was formed and the terms the parties have and have not agreed upon: Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd.[59] 

   [57] (2006) 95 SASR 174 at [85-86].

   [58] Above at CLR 347 per Mason J.

   [59] (1988) 14 NSWLR 438 at 443-444 per McHugh J.

8. This distribution agreement was for the wholesale distribution of wine between a winery and wine merchant, in the expectation of an unspecified long-term association.  For its part Ballast Stone spent millions of dollars expanding its business and land holdings and redirecting its sales targets towards bottled wine, which up until then had formed just 2-3% of total business.  Wine Solutions was just starting up and was keen to secure business providing reliable and consistent supply of quality wine.  It appointed staff and expended moneys on developing local, national and international custom.  More significantly, it introduced and played a significant role in creating the substantial and beneficial business relationship between Ballast Stone and Sip ‘N Save.

9. All this unfolded in a competitive industry at a time of high over supply - the witnesses described the situation as a “wine lake” - and where margins at all levels of supply and distribution were under pressure. In this environment it is not surprising both were interested in a long-term arrangement for the stability that would provide.  By the same token it is inconceivable that they considered themselves bound indefinably to each other.  Ballast Stone would clearly not wish to continue with a distributor consistently failing to meet reasonable sales targets or paying its bills on time for that matter, and Wine Solutions surely would not want to be locked into an arrangement that bound them to purchase wine not up to standard or insufficient in quantity to keep their business on profitable terms.  Given these considerations, it is plainly within all the factors outlined in Codelfa, to imply a term that the parties must have intended  their arrangements to be terminable on reasonable notice.

10. The actual period of notice applicable, depends on weighing these considerations based on the circumstances pertaining when notice of termination was given.  That includes how long it might take for Wine Solutions to redeploy its resources, to cushion itself against change, to make alternative arrangements to fulfill its current commitments to Ballast Stone, to bring the relationship to an end in a business like manner, as well as the length and quality of their relationship and the standards of performance on both sides.  The task does not involve an assessment of the time required to recoup the expenditure that might be entailed. Precious little evidence was directed to these various considerations.  It will prove necessary to return to this topic later.

11. Having resolved these issues, it is appropriate to consider each limb of Wine Solutions’ claim, as they occur in the amended defence and counter-claim.

    The sample claims (paragraphs 7-11)

12. Wine Solutions asserts that following the inaugural meeting at Skye Cellars in June 2002, there was an agreement to supply one case of wine, without charge, for each sixteen cases of wine purchased.  The purpose of such an arrangement, which cannot be doubted, was to allocate (as the tag “sample” suggests) one in sixteen cases to wine tastings and marketing, or to replace the occasional broken or corked bottle.  This type of arrangement is common and the ratio of 16:1 cases is more or less an industry standard. Such arrangements were always subject to specific variation. The value placed on this is $1,184.70; the arithmetic is not disputed by Mr McCarthy, whereas liability is.

13. A good deal of evidence was devoted to this issue but it distills to a very narrow compass.  Whatever the scope of the original understanding was, Ballast Stone supplied and Wine Solutions accepted wines on this very basis, for obvious marketing reasons.  In other words there was part performance.  The invoices show that clearly.  However Ballast Stone claims this was varied or modified when the 2001 Shiraz proved highly successful and won a number of prestigious prizes, including a “Great Australian Shiraz Challenge”.  That this became a premium wine is not in issue.  Nor was it seriously disputed that when wines receive particular accolades and status as the 2001 Ballast Stone Shiraz did, it is not uncommon to cut the free sample arrangement, because the wines acquires sufficient notoriety to sell itself.  It is inherently likely that this happened in this instance, although it was denied by Mr Beavan.

14. The evidential difficulty from Ballast Stone’s point of view on the other hand is that this change in position was said to have been communicated to Mr Beaven by an employee, Ms Ashenden, who was not called.  The evidence of Mark Shaw was inadmissible hearsay for this evidentiary purpose – it cannot prove any such modification.[60]  On the other hand Mr Beavan’s claim to proportionate free samples or supplies if orders of sixteen cases or less were made, cannot be accepted.  He referred to no precise discussion as to this let alone an agreement by Ballast Stone to do so.  There is no industry practice to that effect and more tellingly, it would prove unduly difficult and impractical to implement, package and invoice.

    [60] Transcript 932 L36 – T933 L13.

15. On the basis of these findings, that part of the claim relating to orders for a layer of wine (16 cases) will be allowed, on those invoices in Exhibit P1, where lots of sixteen cases of wine are proved.  The parties will have the opportunity to make further submissions as to the dollar sum this produces.

    The SA Liquor Distributors (SALD) claims (paragraphs 13 and 14) 

16. This portion of Wine Solutions’ case relates to the cost of storing wine at SALD.  Wine was delivered and stored pending delivery to various South Australian retailers, including the 130 or so Sip ‘N Save outlets. It received a margin for this service of $20 a case except for Sip ‘N Save supplies, when it was $18.20.  The difference of $1.80 represents the SALD warehousing fee.[61]  Wine Solutions bore the general cost of distribution and yet it remains in dispute over the costs of warehousing of supplies to Sip ‘N Save.  It pleads that for “every layer of wine supplied one case was to be refunded” to SALD and then Ballast Stone “was to reimburse Wine Solutions in full for the refund to SALD”.[62]  It quantifies this part of the action at $2,810.72.[63] 

    [61] Transcript 601 L13 – L17.

    [62] Amended defence and counter-claim paragraph 4.17.1.

    [63] Documentation in support is Exhibit P3.

17. Mr Beavan’s evidence as to this was not all that easy to follow or understand.  In chief he deposed:[64]

    [64] Transcript 42 L24 – Transcript 44 L5.

    QDid there come a time when there were special promotions that were negotiated with Sip ‘N’ Save.

    AYes.  During that period of two-and-a-half years we had the brand we would do special promotions.  They might be on-premises promotions or restaurant promotions or retail promotions.  The promotion we did during 2004 was if any customer bought six cases of mixed Stonemason wines he would get a bonus case.  It was just, I guess, an opportunity for the customers to get a bit of discount, make more margin, which is we wanted to keep them happy, obviously, so they would keep buying the wine.  The agreement was that Ballast Stone would supply the bonus case of wine for those promotions.

    QSo when these promotions happened it was a joint thing negotiated between you, Sip’N’Save, with Ballast Stone’s knowledge.

    ABallast Stone knew, yes.

    QFor example, in this promotion you were just speaking of, one free case if you bought six –

    ACorrect.

    Q– who was the person at Ballast Stone who agreed to that process.

    AMark Shaw.

    QHow did the paperwork cycle work in relation to those special promotions.

    AA bit complicated actually but, in essence, the wine was delivered from Ballast Stone directly to SA Liquor.  We put the orders in, the six plus one orders, to whoever client it might be, and SA Liquor would deliver the six cases plus one.  They would charge us or claim back on Wine Solutions seven cases, and we would then claim back on Ballast Stone that seven cases – sorry, just the bonus cases not the seven cases, just the bonus cases.

    QSo you would supply them with the seven cases.

    ACorrect.

    QThey only got paid for six, obviously, from their customer because they gave the other one away free.

    ACorrect.

    QAnd they would then invoice you, bill you if you like, for the one so-called free case.

    AYes.

    QWhich in fact they paid for, and so you would send them a cheque for that and you would then make a claim to Ballast Stone to refund you for what you had to pay.

    ACorrect.  For not only the distributors pricing but also the margin and the GST we paid in full to SA Liquor.

    HIS HONOUR

    QSo that was by way of invoicing.

    AYes.

    QYou claim on Ballast Stone by invoice.

    AI believe it was paid a credit or we were paying credits, yes.

    QWould you forward on to them the claim that you had received from SALD so that they knew what you had had to pay SALD and then they prepared a credit note.

    AThat’s correct.

18. Under cross-examination it became apparent that he erred in basing his calculations on the wholesale price.[65]  Then he accepted no reconciliation of any of the supposed credits was undertaken to verify the calculations that yielded the $2,810.72 figure. [66]  To make matters worse, the records of Ballast Stone suggest Wine Solutions was given credits for more than it was entitled to.[67]  In that state of affairs this claim is not made out on the evidence.  Even if it was, no proof of damages flowing from the supposed breach is demonstrated.

    [65] Transcript 613 L5 – Transcript 615 – L6.

    [66] Transcript 617 L10 – L21.

    [67] Transcript 854 L34 – Transcript 855 L8.

    The Stone Mason or royalties claim (paragraphs 15-27)

19. The correspondence quoted earlier, shows how Stone Mason was developed for exclusive distribution through Sip ‘N Save as a “second tier” Ballast Stone wine.  It is conceded this name was conceived by Wine Solutions.  It is clear Mr Beaven harbors the strongly held view that his company was and is given too little recognition for creating the label and the concept, even in the face of early registration of the trade mark by Ballast Stone.  His company pleads that “at a meeting of August 2003” – presumably the meeting at Wine Solutions’ office mentioned earlier – an agreement was reached to pay $5.00 per case “on all cases of Stone Mason Wines sold outside the state of South Australia”.[68]

    [68] Paragraph 24.2, amended defence and counter-claim.

20. The evidence on this topic was that Mr Beavan and Mr Kay were present for Wine Solutions and Mark Shaw and Mr Loxton for Ballast Stone. Beavan “expressed concerns that we weren’t being included in Stone Mason arrangements with Sip ‘N Save on agreements, and that we were not being allowed to sell our brand interstate”.[69]  This passage and many others to the same effect, reflect Mr Beavan’s deep seated conviction in relation to the genesis of the Stone Mason design.  His evidence continued:[70]

    [69] Transcript 47 L35-38.

    [70] Transcript 48 L9 – Transcript L49 L6.

    AI think Martin Kay and myself both realized that this is why we called the meeting, this was happening and we were preparing ourselves for how we would handle that.  Martin and I both discussed if Ballast Stone wanted to sell Stonemason interstate that that would be fine as long as we could have involvement in that.  Being our brand, we were looking for a compensation, royalty, whatever, the same that we were getting in South Australia because we had created the brand and both Marty and I asked for a $20 margin on all sales outside of South Australia and Mark dismissed that and said ‘We were only going to offer you $5’.

    QHe said words to that effect to you.

    AThat’s exactly what he said.  Well, very close to what he said.

    QAfter he made that statement to you or made that offer to you, what did you do.

    AWell, I think Marty and I both weren’t particularly happy that we were offered 5 against 20 but we could see we weren’t – we could see we had almost lost control of Stonemason at that stage.  I think we probably both agreed that if we get something in writing, based on the offer of $5, then we would just literally go forward with that.

    QWhat did you tell Martin Kay about this $5 offer.

    AI think I said something along the lines of “We have probably got no choice but to take it”.

    QWhat was the discussion in relation to the documents.

    AI asked – before I left the meeting, I asked for Mark to put all that in writing in a document that we could sign off on and, of course, that never occurred.

    QDid he agree to do that, to put it in writing.

    AYes, he did but with some hesitation.  I just recall not being completely confident when I left the meeting that he would do it but it was clearly understood that that’s what the offer was.

21. The situation was that Ballast Stone always intended to make a “second tier” wine that ultimately became Stone Mason.  It may be accepted the idea was conceived and nourished by Wine Solutions, but in the end result the intellectual property in the concept was always owned by Ballast Stone.  It would make no commercial sense for it to market wine made from grapes grown on its own vineyard, whilst surrendering control over the intellectual property.  The fact of the matter is that Wine Solutions reward for all of this effort, was in the margins which were not inconsiderable.

22. The evidence of Mr Kay (quoted earlier) in particular, demonstrates they realized that surrendering rights in the label was for practical purposes, a necessary part and parcel of the Sip ‘N Save arrangements if they were to succeed.  This is consistent with the evidence of Mark Shaw in relation to this topic, which was that when presented with the reality that Sip ‘N Save was not interested in a “three-way agreement”, Mr Beaven’s response was “oh Well, that’s the way it’s going to be”.[71]  It was only when distribution rights for sales outside South Australia were not secured by Wine Solutions, that Mr Beavan first raised the notion of a royalty. 

    [71] Transcript 747 L30 – Transcript 748 L2.

23. Mark Shaw conceded the issue was raised by Beavan in August 2003,[72] in the context of Beaven being unhappy and becoming aggressive  “with the idea of having Stone Mason taken away”.[73]  Mark Shaw refused outright to accept any question of a royalty:[74]

    [72] Transcript 796 L33 – Transcript 797 L5.

    [73] Transcript 798 L1 – L17.

    [74] Transcript 798 L11 – L33.

    QSo what do you remember him saying to you about this royalty.

    AI remember him just saying that ‘$20 a case if you are going to sell Stonemason without us being involved you’ve got to give us $20 a case for royalty’.

    QDid you ask why.

    AYes, I said ‘Why is that?’, and he said ‘Because it’s our brand, our concept’ and that was his reasoning.

    QWhat did you say to that.

    AI said ‘No it’s not and I can’t give you $20 royalty’.

    QWas any other figure mentioned by anybody about this royalty.

    AI think if it wasn’t going to be $20 it seemed that the $5 fee that we were offering to Innkeepers seemed an amount that we as in Ballast Stone were prepared to accept for some reason and that became the royalty all of a sudden was $5.

    QSo he asked for $5.

    AYes.

    QWhat did you say to that.

    A‘No’.[75]

    [75] Transcript 798 L13 – L33.

1. Mr Kay also remembered Beaven raising the issue of a royalty at this time.  His evidence on this, which was balanced and impartial, can therefore be readily accepted.  It was as follows:-

   QWhat do you recall Mr Shaw saying.

   AThere was discussion of a potential royalty in the meeting of a way to appease Wine Solutions there.

   QFor the concept.

   AFor the concept and what we had done and the work we’d put into it, but we’d never finalized anything on the day but there was talk of that, but nothing ever got nailed down, finalized, and said ‘Right, let’s draw that up’ or whatever, but there was definitely discussions of it.

   QSo there was no agreement as you recall.

   AThere was nothing finalized, no, but it was definitely discussed.

   QShaw didn’t say anything that you remember that gave his agreement to paying royalty.

   ASorry, can you repeat that?

   QMr Shaw, Mark Shaw –

   AYes.

   Q– didn’t say anything that you thought was him agreeing to pay royalty.

   ANo, I probably thought that we didn’t think that the royalty was – you know what I mean?  We weren’t ready to officially sign up for it for $5.  My recollection is there was talk of $5 a case and I think Wine Solutions didn’t sort of sit down and think – we had to really take stock of that rather than just sign straightaway and think that was a done deal.[76]

   Although Kay’s attention was drawn to this discussion in cross-examination, his recall of what was said, remained unchallenged.[77]

   [76] Transcript 1078 L36 – Transcript 1079 L24.

   [77] Transcript 1096 L15 – Transcript 1097 L6.

2. Based on this evidence the only conclusion open is that no agreement was formed at any stage of the negotiations between the parties as to the payment of any royalties at all, still less at $5.00 per case.  The draft distribution agreement drawn up by Wine Solutions contains no reference of a royalty being payable.  Had there been such an agreement, the primary records should have reflected that from the beginning, especially in sales invoices generated by Ballast Stone or in the books of account of Wine Solutions.

   The export claim (paragraphs 28 – 44)

3. This aspect of the litigation arises from undoubted effort expended by Wine Solutions in an endeavor to market Ballast Stone wines in the American market.  The background to this issue and the point to which they secured any wine sales, especially through Mr Beatty, are detailed above.  The evidence was that whatever Beatty’s proposal meant, it was unacceptable to Ballast Stone because it was uncommercial.  Mark Shaw’s evidence, which makes sense for reasons that are self-evident as to this consideration, was:[78]

   [78] Transcript 813 L14 – Transcript 815 L10.

   AWe were looking to launch into the US and other export areas, but we also had a large volume of wine which we could potentially move as bottled wine because of our – yard and bulk wine business.

   QJust see if we can get an idea for his Honour about how that translates, presumably most wine in bottles is exported in containers.

   AThat’s correct.

   QDid you talk about so many cases per container or so many pallets.

   AUsually cases.

   QWhat is the general rule of thumb for a standard 20 foot container in the number of cases –

   AAround 1,100 cases or 1,200 cases per container. 

   QWith that formula, looking at roughly 10 or so, or a little bit more, containers of the shiraz and twice that much for the cabernet sauvignon.

   AYes.

   HIS HONOUR

   QThe economies are such are they, that it’s best to export per container load.

   AYes, definitely, consolidation.

   XN

   QThe last sub-paragraph talks about – until a discussion on proposals has been made, you would be unable to take orders to the US.  Firstly do you remember what it was you were actually saying in respect to that, and can you explain it, because to a lay man it might not be immediately obvious.

   AWe were concerned at this stage that Wine Solutions were trying to push an order on us and to make a decision quickly, and we weren’t comfortable with this situation and the proposal that we’d been asked to get.

   QIs this the Beatty indicative order –

   AYes.  So I was just making them aware that until we received a solid proposal and a comprehensive proposal, we wouldn’t be able to take orders into the US.

   QAt the end of the email, you in essence say “If anything is out of order, let us know’.  Do you recall if you received any correspondence or a phone call raising any queries in relation to this email that you’d sent off on 28 November.

   ANo.[79]

   [79] Transcript 813 L14 – Transcript 815 L10.

   and further:[80]

   [80] Transcript 820 L20 – Transcript 821 L26.

   QThere appears to be saying one pallet of each, a pallet is 64 cases isn’t it.

   AYes, sometimes. Sometimes it’s 56 on export.

   QWhy is that; something to do with the size of the container or height.

   ASomething to do with the packaging, yes.

   QIs it somewhere between 56 and 64, is that a fair way of looking at it.

   AYes.

   QLooking at potentially a pallet or a little bit over a pallet if it’s a 56 pallet of the sparkling pinot, and the same for each of the others – what do you describe that order as, is that a large order.

   ANo, small order.

   QThat would appear to be six pallets. Are you aware if you can get six pallets in a container.

   AEasily.

   QThat would be packed with something else presumably.

   AYes.

   QThe people that specialize in consolidation of various wineries that might be exporting wine in smaller volumes.

   AYes.

   QWhat did you think about a potential order of that size.

   AIt wasn’t sort of what they had been talking about I guess, and it was a small volume, and wasn’t expecting that small a volume.

   QEven if he realized sales of the level of cases set out above, see some of them are 500 cases and so on, is that still a small order.

   AYes, it’s small, but 500 cases is getting better at that price point.

   QWhen you look at these types of orders do you assess the cost benefit of entering into such an arrangement for a small order.

   AEspecially if it’s a long-term proposal.  If it’s a short, one-off proposal then it’s assessed differently, but, yes.

   QWould you do that in respect of this proposal if you were to assume a purchase order arose out of it.

   AYes.

   QWhat did you decide you would do if a purchase order was produced to you in respect of what’s set out in this email.

   AThen we wouldn’t take it up.

4. There can be no doubt that Ballast Stone, through Mark Shaw in particular, knew about the proposed United States trips, from telephone discussions with Mr Beaven from time to time and through correspondence with the Department of Immigration and Multicultural and Indigenous Affairs for the purpose of negotiating export licenses.  Nor is there any doubt that Ballast Stone was kept advised, at least in general terms, of progress in the United States, although the probabilities are there were far less international telephone calls than suggested by Mr Beavan. 

5. At the heart of the claim lies the suggestion that what Mr Beatty wrote in his email of 16 December 2003 (quoted extensively above) amounted to an “indicative order” as it was so described by Mr Beavan.  This is plainly not the case as close examination of the correspondence reveals.  In no sense did it purport to be an invoice or a formal order.  Even if it did, it was insufficient and uneconomic for Ballast Stone’s purposes.  This aspect of the case bears every appearance of being conceived in the aftermath of Wine Solutions being told that it would no longer retain overseas and interstate distribution rights.

6. In point of fact the invoice in question (Exhibit P4, 33a) barely passes muster as a proper GST invoice at all, however that imperfection can be glossed-over.  No occasion was identified by Mr Beavan which pinpointed the formation of an agreement between the parties for the payment of these overseas expenses.  He proved just as elusive in this area as he did in some of his other evidence:[81]

   [81] Transcript 272 L20 – Transcript 274 L35.

   QSo, August 2003 you say you discussed the agreement.  So, what do you remember you said to Mark Shaw that day that amounts to an agreement between you and he to pay what we now see on this invoice. 

   AI didn’t say that.

   QThat wasn’t discussed in that way.

   AWhat Jill was being paid was not discussed on that day, no.

   QSo what Jill was going to be paid – it was never discussed with Mark Shaw in your presence or by you, was it.

   ANo.

   QJust so we’re very clear, any time from the time you first started acting for Ballast Stone as their distributor right through to the time of termination, you never had a conversation with Mark Shaw where you told him that Jill may account for her time at $45 per hour and that Mark Shaw’s business might be liable for that.

   ANo, but as I said before, I’m sure Mark expected to pay.

   QSo the answer is ‘no’.  You said they expected to pay.  So, at no time during that period did you have a conversation with Mark Shaw, that’s during the period that you were working for Ballast Stone Estate Wines, where you told him that you would be sending an invoice to claim for one, two or even three trips to and from the States, did you.

   AWe talked about the costs involved with exporting wine to the States and at the end of the export deal we were to be paid the equivalent of $12.50 per case with the margin, which was a small margin and that was basically the margins and the profit was to cover the costs.  Now, when that export order was cancelled Nathan Shaw invited us, knowing that we had expended moneys to create that order, invited us to put together an invoice for Ballast Stone to pay.

   QWe’ll come to that soon.  We’re dealing with this topic in a little bit more detail at the moment, but my question was, at no time did you ever say anything to Mark Shaw between the time you first started being a distributor until when you finish where you told him you expected his company to be liable for one to three airfares to and fro the United States, did you.

   AIt was assumed if we were flying to the States to set up their business that they would have to pay for it.

   QThat’s just the point, isn’t it; it was assumed by your company that –

   AIt would be assumed by any company.

   QJust a minute.  It will be an expense that might be absorbed if you were successful of getting some work over there.

   AWe were successful and the order was cancelled and we were invited to put together an account, which we did.

7. This passage makes it clear that no agreement was reached.  Under cross-examination Mr Beaven conceded as much, placing an agreement as no higher than “they never said they wouldn’t” pay the overseas expenses.[82] The existence of such an agreement is contradicted by an email to Mark Shaw of 4 December 2002 “it will in no way bind you to exporting with Wine Solutions”.[83] 

   [82] Transcript 467 L24. 

   [83] Exhibit P4, document 8a.

8. Even then, this claim fails for a more fundamental reason.  No evidence was given by Jill Bauer to support the fact that the work was done, what it entailed, why thirty hours a week was charged, on what work and for what purpose.  No evidence was led as to how the charge was derived and no reference was made to any industry standard or otherwise providing any clue as to the reasonableness of that charge.  More than that, the primary records, such as they are, fail to prove the legal liability for those expenses by Wine Solutions.  Furthermore, when making those trips, Wine Solutions undertook work for at least another client Di Giorgio Wines  - for which no invoices were produced despite a call for production[84] – and it is also apparent that a component was personal in nature.  There was evidence they may have been acting for other wineries in addition, including Penna Lane and Murdock Hill, not to mention its own “Tindindi” label, but it is unnecessary to take that inquiry any further.

   [84] Transcript 261 L37.

9. The fact of the matter is that no agreement was struck between the parties, no order was ever obtained by Wine Solutions for wine to be supplied into the US or any other international market and the primary records do not support the contention that Wine Solutions was liable for the expenses.  This claim is also one conceived in the disappointment following failed negotiations and for the purpose of obtaining leverage in the continuing negotiations with Ballast Stone over the terms of distribution rights.  Accordingly this aspect of the claim must inevitably fail.

   Loss of profits claim

10. As noted earlier in these reasons, an assessment of damages in relation to this head of damage was postponed, pending primary findings as to liability.  The contention of Wine Solutions, in a nutshell, is that before they became involved, Ballast Stone sold just 100 cases of wine.  Over the next two years, they generated sales of approximately 10,000 cases of wine, to the point that it became Wine Solutions’ single largest line of business. Terminating the distribution agreement on 12 November 2005 was therefore unjustifiable and unreasonable.  It argues that a period of at least six months was appropriate in the circumstances and calculated losses of $67,000 due to the lost opportunity to continue selling 58 cases per week of Stone Mason and 38.5 of the Ballast Stone Wines, at margins of $18 and $40 per case, respectively.

11. The letter from Finlaysons did not particularly nominate any specific breach as justifying termination. It did refer to a breakdown of commercial arrangements and outstanding indebtedness.  No plea of termination for breach is raised in the amended reply and defence to amended counter-claim, in which it was however asserted that Ballast Stone afforded “a period of approximately three months in order to sell or return any of the wine purchased”.[85]  Just how this came about was not addressed by its counsel, nor was it made the subject of specific evidence.

    [85] Paragraph 37.2.

12. It became evident that Ballast Stone opted for termination because of “total debt … over a long period of time”,[86] because the overseas invoice “became the issue”[87] and they were “going round and round in circles” over such questions.[88]  Ballast Stone contends it is neither possible nor applicable to imply a term requiring reasonable notice of termination – which the court has already ruled upon – and in any event the period of notice was reasonable in the circumstances.  It points out, correctly in the event, that no evidence was led as to “any significant hardship being suffered at all … due to termination”.[89] 

    [86] Transcript 964 L25 – L26.

    [87] Transcript 965 L10.

    [88] Transcript 1005 L23.

    [89] Written submissions paragraph 10.

13. The issue of most difficulty in this context is the degree, extent and duration of outstanding debt.  It was the case for Ballast Stone that sums owing were mounting, on average between $50,000 and $100,000 since at least October 2003, that is to say just over twelve months before termination.  On the other hand, Mr Beavan repeatedly maintained in his oral evidence before the Court, that Wine Solutions were regularly paying accounts, and made payments after receiving funds from the relevant retailer.  He also maintained Ballast Stone allowed one hundred and twenty days before payment fell due. 

14. In relation to the latter topic, the evidence varied.  Some accounts specified thirty, whilst others specified sixty days.  It appears in general terms that a degree of tolerance was permitted, so that sixty days was for practical purposes a minimum and up to one hundred and twenty days was the maximum.  There was evidence of numerous telephone calls seeking payment, however no correspondence was sent backing this up.  On the other hand, it certainly became an issue of central importance by the time of the Tin Cat Café meeting and remained so thereafter. There was also a difference in the evidence between Mark and Nathan Shaw on this.  Mark believing “120 days no later than”[90] whereas Nathan appeared to suggest less.[91] To the extent that Mr Beaven claimed there was an informal agreement requiring payment only when he received funds from the relevant retailer,[92] that cannot be accepted, as it was unrealistic and inherently unlikely.

    [90] Transcript 866 L15.

    [91] Transcript 1003 L5 – Transcript 1008 L32.

    [92] Transcript 509 L6, Transcript 529 L29.

15. In order to appreciate the force of the point made by Ballast Stone concerning the level of aged debt, it is necessary to review the primary records, so far as they go.  The documentary material was not as comprehensive as it might have been.  What is clear enough is that a number of accounts were outstanding for some time and that arrears to the extent of $80,349.39 were admitted.  The sums claimed by Ballast Stone and the dates on which the invoices were raised are summarized in the following table:[93]

    [93] Compiled from paragraph 4 of the amended Statement of Claim and Exhibit P12.

PARTICULARS
Date	Invoice No	Amount	Admitted	Paid
29/10/03	1867	$  9,856.26	Yes
05/11/03	1903	$11,220.00	Yes
25/11/03	1967	$11,550.00	Yes
19/12/03	2057	$  1,518.10	No	26/5/04
30/12/03	2120	$     990.00	No	26/5/04
30/06/04	3394	$  3,795.00	Yes
06/07/04	3132	$11,220.00	Yes
30/08/04	3393	$15,837.25	Yes
30/06/04	3394	$  3,795.00	Yes
28/09/04	3541	$  7,260.00	Yes
28/09/04	3539	$  1,347.50	Yes
06/10/04	3634	$  3,630.00	Yes
14/10/04	3763	$  3,960.00	Yes
22/10/04	3718	$  3,300.00	Yes
26/10/04	3737	$  3,432.00	Yes
26/10/04	3742	$  1,078.00	Yes
26/10/04	3743	$  3,960.00	Yes
12/11/04	CR Note 143	$(3,300.00)	Yes, $4,801.28
04/01/05	CR Note 170	$(1,078.00)	Yes
28/02/05	Reverse CR Note 170	$  1,078.00	Yes
28/02/05	CR Note 183	$(4,884.00)	Yes, $6,193.44
TOTAL	$85,770.11

1. This table demonstrates that by December 2003 outstanding debt was in the order of $35,000 in round figures and that it steadily grew to $80,000 or so by October 2004.  The only explanation appears to be that Wine Solutions claimed the amounts on invoices 1867, 1903 and 1967 as a set off against the export claim. On the findings of the court that position was unjustified.   No other explanation was furnished for the long-standing debt problems. 

2. It is submitted by counsel for Wine Solutions that certain payments fell within the due date payable on an end of the month plus one hundred and twenty day basis.  Those payments were as follows:[94]

   [94] Exhibit P12.

Date	Cheque No.	Invoices	Amount
3/5/2004	617	1963 (24/11/03)	$5,775.00
20/5/04	630	2058 (17/12/03)	$12,980.00
26/5/04	641	2055 (26/3/04), 2056 & 2057 (19/12/03) 2063  23/12/03), 2120 (30/12/03)	$5,906.90
1/6/04	647	2377 (26/2/04), 2344 (17/2/04), 2349 (19/12/04)	$6,567.00
17/6/04	665	2298 (4/2/04), 2299 (4/2/04)	$10,602.90
28/6/04	685	2569 (1/3/04), 2441 (9/3/04)	$6,600.00
26/7/04	707	2442 (9/3/04), 2452 (12/3/04), 2462 (16/3/04), 2550, 2571 (30/3/04)	$18,909.00
16/8/04	727	2673 (20/4/04), 2689 (23/04/04), 2701 (28/4/04), 2700 (28/4/04)	$15,896.10
30/8/04	739	2665 (19/4/04), 2763 (10/5/04)	-$10,065.00 lost in post
15/9/04	757	2882 (31/5/04)	$6,160.00
11/10/04	780	2881 (1/6/04)	$14,080.00
1/12/04	800	2665 (19/4/04), 2763 (10/5/04), 3076 (29/6/04), 3171 (20/7/04), 3133 (6/1/04), 3236 (27/7/04), 3237 (27/7/04), 3240 (29/7/04), 3434 (5/8/04)	$23,276.00
TOTAL	$116, 687.90
Average Monthly payment over 6 months:	$19,447.98

1. It emerges those invoices that were paid, relate to the period between 24 November 2003 (No. 1963) and 5 August 2004 (No. 3434), and that those not paid, straddled essentially the same period, that is from 29 October 2003 (No. 1867) to 26 October 2004 (No. 3743).  No pattern of payment or non-payment is evident except that accounts for that latter part of 2003, and for each month from June 2004, were not met.  No explanation is forthcoming as to why payments were so random or why some of the oldest accounts were not cleared first.

2. Such of the invoices we do have in evidence rendered by Ballast Stone, indicate aged debt of considerable magnitude:-[95]

   [95] Compiled from Exhibit P12 and submission by Mr Strawbridge for Ballast Stone.

Amount Due	Period ending	Current	30 Days	60 Days	90 Days
$112,953.86	31/05/04	$6,985.00	$25,136.10	$25,509.00	$55,323.76
$103,384.96	30/6/04	$14,201.00	$6,985.00	$25,136.10	$57,062.86
$111,964.96	31/07/04	$27,489.00	$14,201.00	$6,985.00	$63,289.96
$120,310.11	31/08/04	$24,241.25	$27,489.00	$14,201.00	$54,378.86
$117,120.11	14/10/04	$3,630.00	$13,420.00	$24,241.25	$75,828.86
$93,954.11	08/11/04	00.00	$19,360.00	$8,607.50	$65,986.61
$117,230.11	31/10/04	$19,360.00	$8,607.50	$65,986.61	$93,954.11
$90,654.11	30/11/04	-$3,300.00	$19,360.00	$8,607.50	$65,986.61

1. The principles applicable to determining what term should be regarded as reasonable for termination, were discussed earlier.  This contract was formed under vulnerable market conditions from the point of view of both parties, within an industry operating annually, from one vintage to the next.  Their arrangements were formed against the backdrop of a related agreement between Ballast Stone and Sip ‘N Save for a minimum of two years and in the context of a mutual understanding permitting Wine Solutions twelve months to develop external markets.  In those circumstances giving due weight to all the above considerations together with the chronic problem of outstanding debt, combine to suggest a term of three months was reasonable in the combined circumstances.

   Desktop Publishing Claim (paragraphs 54 – 60)

2. It was not disputed that during the course of this relationship, Wine Solutions expended a good deal of money, as Ballast Stone would expect, in marketing the Ballast Stone lines.  This was by way of producing graphics for wine labels, tent and table cards, shelf talkers, general promotional material and the like.  Ballast Stone denies liability, asserting that such expenditure was part and parcel of the expenses expected to be incurred by Wine Solutions in the ordinary course of their business as wine distributors.  This was well known in the industry.   The claim here comes to $13,399.73.  No evidence was directly given of the formation of an agreement between the parties for reimbursement of these costs, otherwise ordinarily borne by a distributor.  Mr Beaven effectively conceded as much under cross-examination upon accepting the proposition “because it was terminated, I now claim the desktop publishing because I did not get the benefits of all of it”.[96]  It must fail accordingly.

   [96] Transcript 646 L28 – L36.

   Conclusion

3. On the whole of the evidence, Wine Solutions has failed to prove on balance the existence of other than a basic distribution agreement for an unspecified period, for the sale of Ballast Stone Wine in the local market place, and for a trial period of approximately twelve months in the interstate and overseas markets. The circumstances are such that the court should imply a term, out of business necessity, that this distribution agreement was terminable on reasonable notice.  The SALD and royalties portions of the claim, fail for lack of proof and as unsupported by the documentary evidence.  The claim for desk-top publishing also fails.  Wine Solutions however succeeds in proving the sample claims to the extent of purchases of lots of sixteen cases of wine.

   Orders

4. The proceedings by the defendant Wine Solutions Australia Pty Ltd for damages under the heads SA Liquor Distributors, Stone Mason royalties, and the export claims, are dismissed.  There will be judgment in its favor on the samples claim a sum to be assessed.  As to loss of profits, the court holds a term of the distribution agreement to give three months notice of termination ought to be implied. That portion of the proceedings will be adjourned for an assessment of damages.  So much of the action by the plaintiff remaining on foot, is dismissed.  Questions of interest, damages on the “samples” claim and costs are also adjourned for further consideration.