Cunninghams Marine Pty Ltd v Marine Power International Pty Ltd
[2008] FMCA 412
•2 April 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| CUNNINGHAM'S MARINE PTY LTD v MARINE POWER INTERNATIONAL PTY LTD | [2008] FMCA 412 |
| TRADE PRACTICES – Injunction to restrain termination of commercial agreement – question to be tried as to whether termination reasonable in all of the circumstances – alleged contravention of s.51AC Trade Practices Act 1974. |
| Trade Practices Act 1974, ss.47, 51AC |
| Australian Coarse Grains Pool Pty Ltd v Barley Marketing Board of Queensland (1983) 57 ALJR 425 Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd [1999] FCA 903 Burger King Corp v Hungry Jack’s Pty Ltd Godfrey Constructions Pty Ltd v Kanagra Park Pty Ltd (1972) 128 CLR 529 Pierce Bell Sales Pty Ltd v Frazer (1973) 130 CLR 575 Automasters Australia Pty Ltd v Bruness Pty Ltd [2002] WASC 286 |
| Applicant: | CUNNINGHAM'S MARINE PTY LTD |
| Respondent: | MARINE POWER INTERNATIONAL PTY LTD |
| File Number: | BRG 151 of 2008 |
| Judgment of: | Wilson FM |
| Hearing date: | 28 March 2008 |
| Date of Last Submission: | 28 March 2008 |
| Delivered at: | Brisbane |
| Delivered on: | 2 April 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr Clarke |
| Solicitors for the Applicant: | Cleary Hoare Solicitors |
| Counsel for the Respondent: | Mr Schlict |
| Solicitors for the Respondent: | Anderson Rice Lawyers |
ORDERS
That the injunction granted on 12 March 2008 continue until the final hearing of this matter.
That the matter be listed for final hearing on 25, 26 and 27 June 2008.
That any amended Statement of Claim be filed and served on or before 10 April 2008.
That any request for particulars of the Statement of Claim be delivered on or before 17 April 2008.
That any particulars properly requested be provided on or before 24 April 2008.
That a defence be filed and served on or before 1 May 2008.
That any request for particulars of the defence be delivered on or before 8 May 2008.
That any particulars properly requested be provided on or before 15 May 2008.
That any reply be filed and served on or before 22 May 2008.
That each party make disclosure by a list of documents to be filed and served by 29 May 2008.
That inspection of disclosed documents be completed by 5 June 2008.
That either party have liberty to apply to re-list the matter upon the giving of two (2) business days notice in writing to the other party and the Court.
That the matter be listed for trial directions on 6 June 2008 at 9.30am.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 151 of 2008
| CUNNINGHAM'S MARINE PTY LTD |
Applicant
And
| MARINE POWER INTERNATIONAL PTY LTD |
Respondent
REASONS FOR JUDGMENT
These proceedings concern the right of the respondent to terminate a Dealer Agreement, dated 25 February 2002, between it and the applicant. Although by its express terms, the agreement permits either party to terminate it on the giving of 30 days written notice, the applicant contends that the respondent should be restrained from acting on its written notice of termination dated 12 February 2008. On
12 March 2008I granted an interim ex parte injunction restraining the respondent from acting or relying upon the notice of termination given by it to the applicant by letter dated 12 February 2008. The matter has returned to court to determine whether that injunction should be extended until the trial of this action, which, as foreshadowed to the parties, could be listed in June 2008.
The respondent has instituted proceedings in the Supreme Court of Victoria seeking a declaration that it has validly terminated the Dealer Agreement. The respondent did not submit that, by reason of those proceedings, I should not determine whether to enlarge the operation of the injunction until trial. The applicant’s counsel informed the court that the applicant is applying, on 4 April, for a stay of the Victorian Supreme Court proceedings.
The principles to be applied in determining whether to grant an interlocutory injunction are well settled: Australian Coarse Grains Pool Pty Ltd v Barley Marketing Board of Queensland (1983) 57 ALJR 425. Two questions must be addressed. First, is there a serious question to be tried; and, secondly, does the balance of convenience favour the granting of the injunction.
The applicant relies on two arguments, that it submits amount to serious questions to be tried, to impeach the respondent’s purported termination: first, it is submitted that delivery of the notice of termination was in breach of s.51AC Trade Practices Act 1974; and, secondly, it was in breach of an implied term of reasonableness and fairness in the Dealer Agreement, pursuant to which the notice was given. For its part, the respondent accepts that it is arguable that such a term should be implied into the agreement between the parties. However, it argues that, even accepting the applicant’s evidence, a court could not find that the respondent acted in breach of such a term, or that it acted in contravention of s.51AC of the Act. The respondent has effectively asked the court to summarily dismiss the applicant’s case, because its argument, if accepted, is that there is no serious question to be tried because the applicant’s evidence, even if accepted, does not establish that there has been any breach of the asserted implied term, nor of s.51AC of the Act. The respondent submits that, on the applicant’s own evidence, there has been a breakdown of relations between the parties, justifying the respondent terminating the Dealer Agreement.
Whilst the respondent has accepted, for the purpose of the interlocutory application, that a term arises by operation of law that it is obliged to act reasonably and fairly in exercising its contractual right to terminate, the exact content of that obligation was not fully explored at the interlocutory hearing. It is an obligation more easily stated than applied, depending very much on the facts and circumstances against which the respondent’s actions are to be judged. For its part, the respondent submitted that if it is accepted that it acted to protect its legitimate business interests by terminating the agreement, it could not be said to have acted in breach of the term of reasonableness and fairness. That, however, begs the question rather than answering it. The reason for the respondent acting in the way that it has is the crucial factual dispute in these proceedings.
Both parties referred to the judgment of Finkelstein J in Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd [1999] FCA 903. At [35] his Honour said:
“If such a term is implied it will require a contracting party to act in good faith and fairly, not only in relation to the performance of a contractual obligation, but also in the exercise of a power conferred by the contract. There is no reason to think, prima facie at least, that the obligation of good faith and fair dealing would not act as a restriction on a power to terminate a contract, especially if that power is in general terms.”
His Honour continued, at [37]:
“In my view a term of a contract that requires a party to act in good faith and fairly, imposes an obligation upon that party not to act capriciously. It would not operate so as to restrict actions designed to promote the legitimate interests of that party. That is to say, provided the party exercising the power acts reasonably in all the circumstances, the duty to act fairly and in good faith will ordinarily be satisfied.”
His Honour declined to grant interlocutory injunctive relief because he was satisfied that the respondent did have a good reason to terminate the applicant’s dealership and, in any event, reasonable notice was given.
On this aspect of the applicant’s case I must be satisfied that there is a serious question to be tried as to whether the respondent acted unreasonably or capriciously. As is readily appreciated, the question as to whether a party has acted reasonably depends on looking at all of the surrounding factual circumstances, and ascertaining motives, if necessary. That tends to suggest that the question of reasonableness is one better left to a trial, rather than be determined on an interlocutory basis, if there are disputed questions of fact.
The respondent, an ultimate subsidiary of an American parent company (Brunswick Inc), is engaged in the business of manufacturing, selling and distributing a number of maritime products, including Mercury and Mariner outboard engines and Quicksilver parts and accessories.
Since the mid 1980’s, first in North Queensland and, since 1989, at Margate north of Brisbane, the applicant has been a retailer of the respondent’s maritime products. It seems to be common ground that since approximately 1992 the applicant has been a highly successful dealer in Mercury outboard engines, a brand with significant market caché.
The respondent’s submissions focussed on the fact that prior to mid 2007 the applicant acted as a Mercury “mono dealer”. By that I understand the respondent to assert that the applicant dealt exclusively in Mercury products at the retail level. Because the Mercury and mariner outboard engines were identical, apart from their external appearance, the applicant also provided a spare parts and service facility for both brands. By acting as a mono dealer the applicant’s manager, Mr Bruce Cunningham, was entitled to participate in the respondent’s “dealer’s forum” at which matters of concern to dealers were debated.
The respondent’s submissions focussed on the desire of the respondent to have the applicant [or, as matters transpired, some other dealer] as a mono dealer of its Mercury products. It was argued that it was in the respondent’s commercial interests for that to occur. It was contended that mono dealers performed better for the respondent than those who dealt in competitor’s products as well.
In assessing the reasonableness of each party’s position it is of course necessary to refer to the terms of the agreement that governed their commercial relationship.
The dealer agreement, dated 25 February 2002 provides:
a)By clause 1.1 in Section I:
“Subject to the provisions of this Agreement, Dealer is hereby granted the non-exclusive right to establish, operate and maintain a Dealership at 279 OXLEY AVENUE, MARGATE QLD 4019 but at no other place for resale and repair of the Products described in Item 2 of the Schedule”
b)By clause 2.1 in Section I:
“Distributor will sell to Dealer and Dealer will purchase from Distributor the Products listed in Item 2 of the Schedule (“the Products”). Nothing contained in this Agreement shall oblige Distributor to sell to Dealer or Dealer to purchase from Distributor any products other than those set out in Item 2 of the Schedule.”
c)By clause 2.1 in Section II:
“Dealer shall actively promote the sale of Products and adequately and consistently display and demonstrate the Products.”
d)By clause 2 in Section III:
“Distributor will endeavour to fill the orders of the Dealer promptly. Failure to fill all or any part of an order shall not render the Distributor in any way liable to Dealer.”
e)By clause 4.1 in Section III:
“Dealer acknowledges that it is not the agent, partner, employee or representative of Distributor. Dealer shall not enter into any Agreement or commitment in the name of or on behalf of Distributor or in any way obligate or attempt to bind Distributor to third parties in any respect whatsoever. The relationship is strictly that of buyer and seller.”
f)By clause 6.1 in Section III:
“The success of a Dealership depends on the ability, energy and integrity of the individual or group of associates who operate it. Adequate financial resources are also essential. Accordingly at any time after the happening of any of the following the Distributor is not restricted to thirty (30) days notice period required by clause 6.2, and may give notice of immediate termination:”
g)By clause 6.2 in Section III:
“Either party may terminate this Agreement without assigning a reason by giving to the other thirty (30) days prior notice in writing of such termination.”
h)By clause 11.4 in Section III:
“This Agreement is constitutes the entire Agreement of the parties as to its subject matter and supersedes all previous Agreements, understandings and negotiations as to that subject matter.”
The respondent relies on clause 6.2 in Section III of the agreement as entitling it to terminate the dealer agreement. Some other matters may be observed about the agreement. First, the agreement has no term. The parties cannot be required to be bound by the agreement indefinitely. Secondly, the applicant’s dealership is expressly non-exclusive. Conversely, the applicant is not required by the terms of the agreement to sell only the respondent’s products. Thirdly, by the agreement the applicant can sell both Mercury and Mariner outboard engines. There is no prohibition on the applicant doing so and indeed it is arguable that by clause 2.1 in section I of the agreement (when read with the schedule of products covered by it) the respondent is obliged to supply both products to the applicant for re-sale.
This gives rise to the question: if by the terms of the dealer agreement the applicant is permitted to sell products other than those of the respondent, and the respondent is entitled to appoint dealers in addition to the applicant, is it reasonable for the respondent to terminate the dealer agreement because of a desire to have a mono Mercury dealer in the territory previously serviced by the applicant? The respondent says that it is reasonable because it is in its commercial interests for that situation to prevail. The applicant argues that the real reason the respondent gave its notice of termination was to punish the applicant for selling a competitor’s products and/or to coerce it into agreeing to become an exclusive Mercury dealer. That latter argument has overtones of a potential breach by the respondent of s.47 of the Act, a provision that has not, to date, been invoked by the applicant.
Whatever be the correct answer to the question just posed, the overarching question is whether the issues are better left for trial, where all witnesses can be confronted with the opposing contentions, or whether they can be decided summarily, as the respondent submits.
The respondent refers to the applicant’s own affidavit evidence which deposes to a decline in relations between the parties and notes Mr Cunningham’s statement that he was “totally disenchanted” with the respondent. Counsel for the respondent submitted, rhetorically, why should the parties be forced to continue their relationship, even if only for a limited period, when one of them was admittedly disenchanted?
Mr Cunningham in his affidavit makes reference to a number of events that he says have led to a “declining relationship” between the parties. First, there was the cessation of the applicant’s membership of the forum of Mercury dealers. As Mr Temple, on behalf of the respondent explains, membership of this group is limited to “mono dealers”. Because the applicant had commenced selling Suzuki products, it was no longer entitled to be a member of the forum.
Secondly, Mr Cunningham points to his dissatisfaction with what occurred regarding the respondent paying for the costs of signage at the applicant’s new premises at Snook Street at Margate. Mr Temple explains that the respondent did in fact reimburse the applicant for the costs of such signage.
Related to the signage issue was the belief by Mr Cunningham that the respondent was going to give the applicant two 250 HP Mercury outboard motors to assist in defraying some of the costs and expenses associated with the establishment of the applicant’s new premises. He says the applicant never received the motors and “this was a further factor in the souring of my attitude toward Mercury and my decision to look elsewhere for an additional dealership and ultimately accept a Suzuki dealership”. Mr Temple denies there was any agreement to gratuitously provide the motors to the applicant.
Thirdly, and it seems most significantly, there is a dispute between the parties as to whether the respondent represented to the applicant that it would become a dealer in SeaRay pleasure craft, a product of an American associated but separately managed company, and one that the applicant was desirous of retailing as part of its business. Mr Cunningham acknowledges that Mr Temple said he could not give any guarantees as the SeaRay dealership was in the hands of the Americans but said that the applicant enjoyed his support. The documents exhibited to Mr Temple’s affidavit give strong support to the respondent’s submission that Mr Temple did indeed strongly support the applicant’s desire to become a SeaRay dealer. There is a factual dispute between the parties as to when the conversations concerning the SeaRay dealership occurred. Mr Temple says it was in October 2006. Mr Cunningham says that it was in March 2007. It is not possible to resolve that factual dispute on this interlocutory hearing.
In any event, at paragraph 31 of his affidavit Mr Cunningham says “After the SeaRay negotiations were terminated, I became totally disenchanted with Mercury and because I was after a new package BMT [boat motor trailer package] style of product I turned to Signature-Suzuki”.
At paragraph 33 of his affidavit, Mr Cunningham says he was “increasingly disillusioned with Mercury”. Apparently, Suzuki (a competitor of the respondent) had been trying to persuade the applicant to sell its products for over three years.
The applicant was further annoyed when the respondent apparently allowed Sundown Marine to operate a Mercury dealership in the area previously serviced by the applicant. However, the Dealer Agreement expressly provides that the applicant’s right to sell the respondent’s products is “non-exclusive”.
At paragraph 20 of his affidavit Mr Cunningham says that by 7 June 2007 “for the reasons I will set out, I had become disenchanted and was looking for alternate products to sell, in particular Suzuki.”
Mr Cunningham says that he filled out the paperwork for a Suzuki dealership on 19 June, but did not then sign anything. He says that on 28 June 2007 he received a telephone call from Guy Williamson, an executive of the respondent, who accused him of taking up a Suzuki dealership. Mr Cunningham says, at paragraph 38 of his affidavit: “I was so angry with the presumption of Guy Williamson’s telephone conversation with me on 28 June 2007, even though I had not then signed with Suzuki I decided to do so.”
Mr Cunningham says that the sale of Suzuki products by his dealership has not been to the detriment of the applicant’s sales of Mercury outboard engines. There is presently no evidence to the contrary.
Mr Temple says the market north of Brisbane is a market of high significance to the respondent because it contains a large and growing market for the respondent’s products. To date the respondent’s only dealer in that region has been the applicant. Mr Temple says that the applicant was first appointed a Mercury Dealer in 1992. He says the applicant was a “mono dealer” of Mercury Outboards until 2007. As a mono dealer the applicant sold only Mercury branded outboard engines. Mr Temple says “the applicant has been a good Mercury dealer and, until January this year, the applicant was the respondent’s preferred dealer for the region.”
It seems to be common ground between the parties that it was the practice of the respondent, notwithstanding the actual terms of the Dealer Agreement, to allow a dealer to sell one or other of the Mercury or Mariner brands, but not both, hence repeated recourse to the term “mono dealer”.
It is also common ground that, except for their outer casing the two products are identical. It is also common ground that Mercury outboard engines have a higher profile in the market and have the benefit of more intensive marketing and advertising.
What emerges from the affidavit material of both sides is that by mid 2007 the applicant was dissatisfied with what he perceived (whether rightly or wrongly) to be less than satisfactory support for one of the leading Mercury dealers. The applicant began looking for other products to sell. For its part the respondent was anxious to retain the applicant as its Mercury dealer, but only if it acted as an exclusive Mercury dealer.
Pursuant to the terms of the Dealer Agreement, the applicant was lawfully entitled to sell the products of competitors of the respondent. Over the ensuing six months the respondent tried to entice the applicant to revert to being a Mercury mono dealer. Whether it was because he perceived a commercial advantage to the applicant or otherwise,
Mr Cunningham attempted to exploit the respondent’s desire to secure the applicant as a mono dealer by seeking more generous terms than the respondent offered any other dealer. He was unsuccessful in that regard.
Mr Temple says that in late June 2007 he became aware that the applicant had begun selling Suzuki outboards and was very concerned. Mr Temple, at paragraph 40 of his affidavit, says that in his experience dealers who change from mono dealers of Mercury to dealers who sell more than one brand of outboard engines reduce their performance in selling Mercury engines. He says that he resolved to “win the applicant back” as a mono dealer for Mercury.
On 29 June 2007 Mr Temple sent Mr Cunningham an email that hinted at the respondent’ intentions. It stated, in part:
“We will be carrying out a market study to determine the best way to protect our business in order for us to ascertain what is best for our continued sales growth and profitability of our Brunswick brands.”
In an internal email from Guy Williamson (State Manager Queensland of the respondent) to Mr Temple on 3 July 2007 it was stated, inter alia:
“If Mercury was to make a stand and walk away from either of these dealerships it would send a strong message thru out [sic] the market not only in QLD but Australia wide, also I believe that the Dealership receiving the letter would soon very quickly decide that a second brand may not be the best choice. In the short if we served Tweedcoast a 30 Day letter I believe that not only would they drop Suzuki but Cunningham’s would also take a very close look at the decision.”
The reference to the Tweed dealership was to Hinterland Marine, which was also a dual dealership.
It could be argued that this email evinces a plan by the respondent to terminate dealer agreements of, inter alia, the applicant as a strategy to persuade other dealers who either were or intended to sell products of competitors of the respondent to desist from doing so and remain mono dealers for the respondent. It would follow, in the applicant’s submission, that the termination of the applicant’s dealer agreement was not for legitimate reasons but as part of this overall strategy. The respondent would counter that such a course of action is designed to protect its legitimate business interests. In my view, the resolution of that issue is one best left to trial, where the matter can be fully and properly debated, rather than decided in a peremptory way on an interlocutory application.
Further support for the applicant’s argument (and perhaps also for the respondent’s argument) may be found in an email dated 24 October 2007 from the respondent’s Director of Outboards, Ken Evans, to
Mr Temple:
“Guy and I have concerns about the Cunningham situation unless we get a 100% commitment to going single. We need to advise Sundown of our position. If we say no go we have lost the advantage and Bruce will know that . . . “
Mr Temple
says that he attended a meeting with Mr Cunningham on 1
8 December 2007. His objective for the meeting was to convince
Mr Cunningham to drop the Suzuki brand. At that time the applicant remained the respondent’s preferred dealer but the respondent required a dealer who would be focussed on selling the Mercury brand of outboards. The respondent’s strategy for the applicant’s sales area required a dealer who would focus on selling just the Mercury brand of outboard. Mr Temple says that he offered the applicant a Premium Dealer Agreement which was part of the respondent’s Dealer Advantage Program and available only to Mercury mono dealers. It provided for a fixed term of three years and additional benefits and incentives to dealers. It also provides an exclusive sales area.
Contemporaneously with trying to lure the applicant back, the respondent embarked upon negotiations with first Sundown Marine and, more recently, Crew Marine (when the former business was placed into administration). Both businesses were prepared to act as a Mercury mono dealer.
This conduct can also be viewed in two ways. From the applicant’s viewpoint it demonstrates that the respondent was surreptitiously arranging for another dealer to replace it, and once organised, terminated the Dealer Agreement because of the applicant having commercial dealings with a competitor. From the respondent’s viewpoint it was acting to ensure that it had a mono dealer in place in case its preferred option (the applicant resuming to act as a mono dealer) did not come to fruition. Again, I think it is best left to trial to resolve which of these is to be preferred, after hearing from the relevant witnesses.
On 7 February 2008 the respondent appointed Crew Marine as an exclusive Mercury dealer. It did so before terminating the Dealer Agreement with the applicant. The interests of Crew Marine are obviously affected by this litigation. If the respondent is restrained from terminating the Dealer Agreement with the applicant, even for a relatively short period of time, Crew Marine will not be able to act as an exclusive dealer within its territory.
For that reason, Crew Marine should be put on notice of the proceedings, so that it can decide whether to seek to be joined.
The respondent submits that there has been no unconscionable behaviour on its part, or any lack of reasonableness or good faith, looking at the applicant’s evidence. In my view, it is not possible, nor appropriate to determine that question on an interlocutory basis. Once it is accepted that the respondent was obliged to act reasonably in terminating the Dealer Agreement, in my view an enquiry at trial is necessary to determine the true reasons and motives for the respondent acting in the way that it did. It may ultimately transpire that the respondent has acted entirely reasonably in seeking to protect its business interests, but I am satisfied on the evidence as it currently stands that there is a serious question to be tried on this issue.
As Burger King Corp v Hungry Jack’s Pty Ltd makes clear, by reference to Godfrey Constructions Pty Ltd v Kanagra Park Pty Ltd (1972) 128 CLR 529 at 548 and Pierce Bell Sales Pty Ltd v Frazer (1973) 130 CLR 575 at 587, the court can control the use of rescission clauses for improper or extraneous purposes.
There is also a further question to be tried. That is, assuming the respondent is entitled to terminate the Dealer Agreement, having regard to the length of the relationship between the parties and the effect that such termination will have on the applicant’s business, is 30 days notice appropriate?
The respondent referred to the fact that on the day of the ex parte hearing the applicant signed a Mariner dealer agreement (exhibit 1). It submits that the failure to disclose this fact amounted to material non-disclosure that, of itself, is sufficient to move the court to dissolve the injunction. Further, it seeks to argue that the conduct of the applicant in entering into this agreement constitutes conduct that precludes (or estops) the applicant from seeking to maintain the Dealer Agreement.
However, as I have explained the Dealer Agreement permits the applicant to sell both Mercury and Mariner products. It is not necessarily inconsistent with that agreement for the applicant to execute the Mariner dealer agreement. It would, of course be inconsistent with the course of business seemingly accepted by the parties that one dealer could not trade in both brands. The applicant says that it executed the Mariner dealer agreement so as to mitigate its damages, in case it fails in the principal proceedings. Further, it argues that the agreement has not been executed by the respondent, so there is in fact no concluded agreement in place. At best, it is said, there are negotiations on foot between the parties, which the applicant was not obliged to disclose to the court.
In my view, in the absence of evidence that there is a concluded agreement on foot intended by the parties to replace the Dealer Agreement the subject of these proceedings the failure by the applicant to disclose that it was negotiating with the respondent to make such an agreement is not non-disclosure of the type contended for by the respondent.
It is not possible, on the evidence currently before the court, to make the findings necessary to support a conclusion that by executing the Mariner dealer agreement the applicant is estopped from pursuing the relief it seeks in these proceedings. That is a matter best dealt with at trial.
Further, the offering by the respondent to the applicant of a Mariner dealer agreement, and the applicant’s apparent willingness to enter into one may be evidence of the willingness of the parties to continue their commercial relationship. Further, the applicant seeks to draw support from the offer of such a dealership which would entitle the applicant to sell Suzuki products as well as Mariner products, as evidencing the real rationale of the respondent in seeking to terminate the Dealer Agreement, namely to stop the applicant dealing in competitor’s products. As such conduct was lawful by the applicant under the Dealer Agreement, as I have said the serious question to be tried is whether the respondent’s motives were reasonable. The applicant argues that he answer to this issue isn’t just dependent on the legitimate commercial interests of one party; the court has to look at the legitimate commercial interests of both parties.
The respondent also submits that the balance of convenience favours discharging the injunction. It is true that there are third party interests potentially involved. However, that is a consequence of the respondent entering into an agreement with Crew Marine before it terminated its agreement with the applicant.
It is not possible to conclude at this stage that damages will adequately compensate the applicant. If the court concludes after hearing all of the evidence that the respondent is entitled to terminate the agreement on the giving of a certain period of notice, then damages will be adequate to compensate the respondent. However, if the court concludes that the respondent acted unreasonably in purporting to terminate the agreement on the giving of only 30 days notice, and sets aside the purported termination, the parties continue in a commercial relationship. They may resume negotiations for the applicant to become a Premium Dealer, as is the respondent’s stated desire. They may continue their relationship in a different form. Alternatively, the respondent may now be minded to terminate its commercial dealings with the applicant, come what may. Until those facts are determined it will not be possible to say whether the applicant can be adequately compensated in damages.
I have so far focussed on the alleged breach of the implied term to act reasonably in exercising contractual rights. The applicant also relies on breaches of s.51AC Trade Practices Act. The potential application of that section has not been fully explored by the courts to date. A number of authorities suggest that unless one party has acted with serious misconduct, relief ought not be granted. There is a discussion of the relevant principles to be applied in Automasters Australia Pty Ltd v Bruness Pty Ltd [2002] WASC 286.
I think that having found there is a serious question to be tried on the applicant’s case at common law, it is not appropriate for me to summarily determine the claim under s.51AC of the Act. The same facts will be relevant to both arguments. I do not think the applicant’s claim is hopeless or bound to fail, but neither do I consider it to be as seriously arguable as the common law claim.
Given that I have concluded that there are serious questions to be tried, and that damages may not be an adequate remedy, I consider the balance of convenience otherwise favours the continuation of the injunction, particularly as an expeditious trial can be offered by the court.
Accordingly I will make orders, as set out at the commencement of these reasons.
I certify that the preceding fifty nine (59) paragraphs are a true copy of the reasons for judgment of Wilson FM
Associate: Lynnette Chin
Date: 2 April 2008
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