Cosmetic Equipment Company Pty Ltd v Mobile Cosmetic Treatment Pty Ltd

[2007] VSC 194

130

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No.  5877 of 2007

COSMETIC EQUIPMENT COMPANY PTY LTD (ACN 095 419 364)	Plaintiff
v
MOBILE COSMETIC TREATMENT PTY LTD (ACN 114 886 154)	Defendant

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JUDGE:	WILLIAMS, J
WHERE HELD:	Melbourne
DATE OF HEARING:	27 April 2007
DATE OF JUDGMENT:	27 April 2007
CASE MAY BE CITED AS:	Cosmetic Equipment Company v Mobile Cosmetic Treatments
MEDIUM NEUTRAL CITATION:	[2007] VSC 194

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INJUNCTION – Plaintiff and defendant appointed as distributors of product under separate contracts with supplier – Contracts governed by Chinese law – No evidence as to Chinese law – Defendant intending to offer product for sale at “Beauty Expo” at lower price than that at which offered by plaintiff – Alleged misleading and deceptive conduct by defendant as to its authority to sell product – Whether prima facie case – Defendant’s costs of preparation would be thrown away – Damages adequate remedy – Balance of convenience favouring defendant.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr P Collinson	Oakley Thompson & Co
For the Defendant	Mr P Hayes	Cornwall Stodart

HER HONOUR:

1. The plaintiff (“CEC”) has applied by summons, filed on 26 April 2007, for an injunction restraining the defendant ("MCT") from exhibiting and taking orders for a product at what is described as a “Beauty Expo” tomorrow.

1. CEC and MCT have been or currently are, authorised by a company I will describe as "GSD", to sell equipment for use in the beauty industry (“the product"). 

1. GSD is incorporated under Chinese law and has its registered office in China.  It is common ground that CEC has been appointed as a distributor of the product in the Commonwealth under an exclusive distribution agreement dated 28 April 2007, operating from that date to 1 March 2008. 

1. MCT and GSD are parties to an agreement dated 16 October 2006 under which MCT was appointed GSD’s exclusive distributor of the product in Victoria from 16 October 2006 to 16 April 2007 (“the MCT agreement”).

1. Under the MCT agreement, MCT has obligations to make minimum numbers of orders of the product during each three month period of the agreement.  In the event of MCT’s failure to make the orders, cl 8.1 provides that the MCT agreement shall end automatically at the end of "the corresponding three months of the term".  Nevertheless, cl 8.2 is to the effect that if it were to be the mutual intention of the parties that the agreement should continue at the end of the six months, then "[t]he terms and conditions of the agreement shall be reviewed and renewed". 

1. MCT claims that the MCT agreement remains on foot. It relies upon correspondence and other communications between its director, Mr Brendan Burns and representatives of GSD. 

1. On the other hand, CEC argues that MCT’s rights to distribute the product have been terminated.  It contends that MCT would be engaging in misleading and deceptive conduct, as to its ongoing authorisation to sell and ability to supply it to any persons placing orders with it, if it were to take orders at the Beauty Expo tomorrow.

1. It is common ground that if MCT did engage in misleading and deceptive conduct which was to result in harm to CEC, then CEC might have a cause of action sounding in damages against MCT. 

1. It is also common ground that, at the Beauty Expo, MCT would offer to supply the product at a price of some $21,000 whereas it is marketed by CEC for about $30,500.  CEC contends that it would sustain losses as a result of lost sales to customers who might purchase the product from MCT at the lower price and who would otherwise have been obliged to order it from CEC at the higher price tomorrow.  CEC argues that the Court should grant the injunction because damages would not be an appropriate remedy because it would have difficulty adducing evidence as to the customers of MCT who would have bought the product from CEC at the higher price.

1. I have examined the correspondence relied upon by MCT and have considered the arguments made by counsel for each party as to its alleged effects.  GSD representatives have made what may be described as some cryptic statements in relation to their company's relationship with MCT.  It seems to me that there might be seen to be a serious question to be tried under Australian law as to whether or not GSD has granted an extension of the MCT agreement, were that law applicable.

1. However, as counsel for MCT pointed out, the governing law of the contracts is the law of China.  I note that that assertion was not contradicted by counsel for CEC.  In the absence of evidence as to the effect of events under Chinese law, it is very difficult for this Court to reach any meaningful conclusion as to whether or not the MCT agreement would have been regarded under Chinese law as having been extended, giving MCT a right to demand supplies of the product in all the circumstances.

1. Whilst there is evidence to suggest that the MCT agreement may no longer be on foot, there are also strong indications in the correspondence that GSD might consider both parties to be clients currently authorised to sell the product.  CEC’s contentions about misleading and deceptive conduct are premised upon MCT lacking the relevant authorisation to sell under its contractual relationship with GSD.

1. In the circumstances, I am not satisfied that CEC has established that there is the requisite serious question to be tried.  Nevertheless, I will turn to the issue of the balance of convenience on the basis that I am wrong on this conclusion.

1. There is uncontradicted evidence from Mr Burns that MCT has spent some $38,000 in preparation for the Expo which would be thrown away if it did not take part.  On the other hand, the evidence does not establish that every customer ordering the product from MCT at the Expo would necessarily be a potential client of CEC able and willing to pay a price which is almost 50 per cent greater.  However, I do assume for present purposes, that there would be some potential clients lost to CEC if its rival is allowed to sell the products at a significantly lower price. 

1. Nevertheless, in my view, the balance of convenience favours MCT.  I consider that CEC’s rights would be adequately protected or vindicated by an award of damages.  The price for the product is high and the sales targets set out in the MCT agreement are small: there are, for example, only nine sales anticipated in Victoria in a three month period.  If the market is so small, it should be possible for CEC to identify MCT customers who could be asked whether they would have been prepared to pay the greater price at the Beauty Expo, in order to establish CEC’s loss as a result of any conduct which ultimately does turn out to be misleading and deceptive. 

1. The application should be dismissed.

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CERTIFICATE

I certify that this and the two preceding pages are a true copy of the reasons for Judgment of Williams of the Supreme Court of Victoria delivered on 27 April 2007.

DATED this eighth day of June 2007.

Associate to Justice Williams