Edelsten v Health Insurance Commission

[1988] FCA 258

1

1 No. TG3 of 1987
1

1

BGIWEEN:	CAFIKE PTY. LTD. trading as PORT ARTHUR CIDER COMPANY
Applicant

m:	R.R.	& S.M. POWELL PTY.
-	LTD.

Respondent

BE!rwEm:	R.R. & S.M. P O m L PTY.
-  LTD.
Cross-Claimant

AND:	CAF'IKE PTY. LTD. trading as PORT ARTHUR CIDER COMPANY
Cross-Respondent

CORAM :	BEAWONT J
PLACE:	Hobart
DAm:	25 May 1988

MINUTES OF ORDER

.- .,

THE COURT ORDERQ:

1. That judgment be entered for the applicant on its

claim in the sum of $54,965.57; and that judgment be entered for the respondent on its cross-claim in the sum of $1,320.77; order that the respondent do pay the applicant the sum of $54,965.57 and that the applicant do pay the respondent the sum of $1,320.77; direct that the one judgment be set off against the other and that execution do issue for the balance of $53,644.80 only.

I

2.

. 2. That, without prejudice to any order tor- costs ,

dlraudy made, Lhe respondent pay three-quarters of

the applicant's costs of the proceedings.

Note :	Settlement and entry of orders is dealt with in Order
36 of the Federal Court Rules.

.

IN T E	F E Z 3 A L CCUF!T	OF ATJS?TALIA	)
)

TASYANZAN	D I S T R I C T REGISTRY	)	N o .	TG3	of	198:
)

GEVERAL D I V I S I O N )

AND: CAFIKE PTY. LTC. tra?lnq as

PORT ARTHUR CIDE? C3VP.N'I

Cross-Responder,:

CORAM :	BEAUMONT J
PLACE	: HOBART

DATE : 25 MAY 1988

REASONS FOR JUDGMENT

Cafike Pty . Ltd. ( "Cafike") , trading as Pot-! A?-'.?.ur

Cider Company, sues R.R. & S.F. Powe11 P5y. Ltd., t r a < ? r ~ 3:

G m v e Frx i t Juices (Tas.) ("Gt-Gve"), on several c a ~ s ~ s	nf a,:?-.c,n
'a:lesrd	t o have ariser. out. of an arrangemert made betx2en the

parties in 1994 for the marketing and distribution gf

juice. Grove has cross-claimed a3a:nst Caf-ke in re?pe.:t .-f

severa: causes of aczion said to arise out of their r?lat:onsh1?,

which suhiated u n t l l early 1987.

A: "ze tine of t>.e5+ neqatiations, Sc;ve was ergage6 ',r

the whclesale rarketlng and dls:<:Sut:sr of fr.Al'r ; l l l C ? Z

throughout Tasmania on a ;ubstantla1 scale. Caf.-ke "ad cmnmencer!

the production of apple j u i . : ~ in a. relatively srrall way ar. Yno?.ys

OII 2he Tasman peninsular 3 few years eIr11Pr. At t ; T = ,

Cafike was distrihting its product Imder the trade name 'Grzhat-2

PresseC: Fro:? Apple JLI~CP" or! a mcdest scale t c l o c a l r e f a l l

outlets. I: was also supplying juice tcr C'r-ung Sing, a wx-esale . .

f ru i t and vegetable merchant in Hcbart. I n early 1OP4, Csfi!r=.

carriec! out a num3er	of improvements to 5 2 s pr8331iLct ar?	c+,ng+<
%he name of the juice to	"ILDPL,%:D".	It cbtained. r-gi:trstlcc

of that trade mark In Part A of the F'qister of Trsde Marks 1-

respect of "apple juice and fruit juices coctaining a?ple ;uice"

for a period of seven years from 16 F2bruary 1984. C a f i k e a l s c

launched an advertising campaign f o r its prodtlct. A la5e.l was

designed and about $3,000.00 was spent in advertising ccsts.

,	I
Mr. ?Dwell met again in late March or early Aprll 1994. On t5ls
x c a s i o r . , Yr, Powe.ll showed nore interest in ,:QZ:X~ t? an
arrangement. A possible price strlxture was dlsrlssed. yr .
Petersw,ald says that he then indizs're.' ts Yr. %=ell that it x.33
Cafike's wish to maintain same " r c r t r 0 1 " m e r t?? prxce at whir:?
: C r srn6uct was sol? t3 retail out12t5. Y r . ?quell qav? 3. ~-a i t?er
dlff+rznt version of the c,naersa?:cn, althc1..q5 he qr??T' ?bLat

-

pr ices =ere meEtime4. is , c ~ ~ F , x cr;-zd that t k e par?.-+s xer?

aware t h a t the wholesale price ~f srarge ;liic+ w=.s $1.9.; fTr 3

twn l~:re *conta:ner: that: they acc?p';e.l <h%+ ??L: wa: 315.: T

1 -

appropriat? wholesale p r i c ? for ap,sle ~ I U ~ C P ;	ard that Yr. ?:we--
then indicated t3at approxisately 3C cent3 s?.clu:l	be al?nwd fl:r

the container and the label, that G r w e ' s dl:tr:5utars wmli ask

for 28 cents per unit for distribution and that Grove wouid

require 22 cents per unit to handle the prcduct. It is also

common ground that Mr. Peterswald then accepted that, on these

figures, a deal was only feasible if Cafike were prepar?d to accept $1.10 as the price per unit it would rec-.ive frcm Grove.

Althcugh the discussion was in general	term	and necessarily
tentative, Mr. Peterswald inforaed	Yr. Powell that he wp~ld	write

a letter to Mr. Powell stipulating the 5asi-j.	m ter-ns of price.
upon which Cafike would be prepared to deal.

"further to our conversations regarding the

marketing of apple juice, we have arrived at	same
costs for you to consider.

Firstly, in respect of a volume of around 1 0 0 0

units per week, we think that the following	p r l c e
structure looks reasona5le.

r -

$1.90	Ncolesale
Distrlbutor .:B

$1.62

Package 30

(It is common ground that a "unit" was a two litre container of

refrigerated juice; that $1.90 was the wholesale price; that 28

cents was the projected cost of dellvery and distri5tA::on to

retail outlets by contractors (described by the parties as

"independent distributors" or "vendors"); that 30 cents w a y

allowed as the cost of the cmtainer, the cap, the l a 5 e l and t h e

cartan in which a number of contafners were packed; that 2 2

cents was the sargin to be allowed	t o Grov? for its efforts; a?.?
that Cafike would receive $i.l@.)
.	5 .

letter "lookedokay". It was arranged that they meet at Koonya

to discuss the matter further. It is common grcund that, at this

stage, both parties were keen to enter into a long term

relationship if this were possible.

The makins	of an aareement at Kconva
The Koonya meeting took place	as arranged. They? was a

lengthy discusslsn. It is commcr. ?round that the par~jps :?-en

concluded an agreenent but there 1s a dispute 9 s to SGX .of : t ~

terms. Evidence of this discussion was given by the thr?~

persons present - Mr. Peterswald, his wife, Mrs. Rosemary

Peterswald (another director of Cafike!, and Mr. Powell.

(i)  Mr. Peterswald's version

According to Mr. Peterswald, the discussion proceeded as

follows: (a) Mr. Powell agreed to the proposition

contained in the 4 May letter, subject to proof of

packaging costs as actual costs incurred; the ~ 1 x 1 of

28c. was confirmed as the price to be pald to

contractors to deliver the product from Grove's

warehouse to retail outlets; Caflke agreed to bear the

cost of cartage from Koonya to Grove's warehouse; (bl

the parties agreed that although Cafike would bear the promotional costs already incurred, all future costs of promotion would be shared equally by Cafike and Grove;

(c) Mr. Peterswald asked for a "guarantee" of "minimum

throughput"; Hr. Powell thought that he could "achieve"

100,000 litres per year (i.e. approximately 1,000

containers per week); (d) Mr. Peterswald again

. 6.

indicated that Caflke wished to maintain "control" over
the price at which its product was to be sold by Grove
to retail outlets; Mr. Powell agreed that tbis wa5 a

reasonable proposition. It was accepted by both parties

that any variation in the prices in the 4 May l e t t e r

would have tc be mutually	agrted; it was further ayreed
that Cafike's apple juice would not	be sold by G r m 7 ~ at
a ?rice higher than the wholesale	price of orange 2uire
(at that tine. Grove's wholesale P ~ L C P	for orar.3e julce

was $1.90);	( P ) it was agreed that Grove's Craee	r.a?s
"Grove" would appear on Cafike's "Applenaid"	label	on

the containers holding Cafike's product; (f! 1' W? 3

ayreed that, subject, to Cafike's right to ccmtinue t c

deal with Chung Sing, Grove should have the exclusive

right to sell Cafike's juice in Tasmania with Caflke retaining distribution rights outside Tasmania; Grove

also agreed not to sell any competing product;	( g ) Grove
agreed to pay for product on a	30 day account basis;

(h) a new type of container was agreed upon; (i) it was arranged that another sticker be designed to be placed

on the top of the container stating that	the product was
100 per cent fresh apple juice; Cj) it was proposed that
the new product be launched	in June or perhaps July;

(k) the agreement was to last for five years wlth two options to renew of five years' each; (1) Mr. Powell

.

l .

was to arrange for the agreement to be put into a

written form; (m) as an administrative matter, it was

proposed that Cafike outlay in the first instance the

cost of the container and the cap and Grove pay the cost

of the label and the carton in which the containers were

packed on the footing, in each case, that the party

meeting these costs would be reimbursed out of the

proceeds of sale arising on the wholesale transaction at

$1.90 per unit.

In his evidence, Mr. Peterswald explained that, at the

Koonya meeting, Mr. and Mrs. Peterswald had before them an

aide-memoire prepared by Mrs. Peterswald to serve as an agenda of

matters to be discussed with Mr. Powell. It was in the following

terms - (?or convenience a typewritten version was prepared at

the hearing and this version precedes the handwritten one):

- - .

- . 1 Y F PAY PROMOTION - .__ . .~ ~ ~~ ~ COSTS SO FAR. 5 6 / 5 0 AFTER I

2   MINIMUM THROUGHPUT 100.000 LTRS

3 CONTRACTUAL ARRANGEMENT WHAT PERIOD PRICE VARIATIONS INDEXED TO

5 TIME FOR CONTRACT d

6 . DO WE WANT TO BOTTLE HIS

7 . TERMS OF PAYMENT.

8 . BIG STICKER ON BOTTLE

9. BOTTLE TYPE / 25Oml. ETC J

10 SUPPLY OF BOTTLES - LABELS ETC

11.CHUNGS STILL GET ORCHARD PRESSED

12.CARTAGE UP	c'
13.SOUTHERN FRUITS	LAUCH WITHIS NEXT 2'WEEKS
14.PACKAGING PROCUREMEKT	h -20

7     .JL\ 'E

PRODUCT L I F E

16 12

- _

!

t

.

It will be noted that item 3 in the aide-memotre

referred 5 9 the period of any contractual arrangement. The

document also mentioned the figures " 5 + 5 f 5 " . Mr. Ppterwald

said that it was agreed that the arrangement between the prtles

was to subsist for a period of five years with options ts reFew

for two further periods of five years'each. It will alss be noted

that iten 5 in the aide-memoire mentioned "time for cnntract"

with a tick beside it. Mr. Peterswald said that he wrz'e the

figures " 5 + 5 + 5" on the aide-aemcire at the meeting. It will

also be recalled that item 3 in the aide-memcire a l s c t -e l f?r r~? to

price variations in the context of prices being indexed ta orange

juice prices. Mr. Peterswald's understanding at the ?:me was

that. the wholesale price then of a two litr? contaicer of chl:le3

orange juice was $1.90.

Mr. Peterswald said that, after the meeting conclude?,

Mr. Powell stayed on at his home for dinner at his request.	It
was then mentioned that the agreement should be formalised in writing.

(ii) Mrs. Peterswald's version

Mrs. Peterswald substantially corroborated her husband's

account of the meeting. She also referred to Mr.

Peterswald's concern that "cnntrol" be retained by

Cafike over the wholesale price at which Grovt was to

market the juice.	Her evidence was that it was agree4
that any variation proposed to the wholesale	price was
to be the subject	of discussion with, and agreement by,
Caf ike	.

.

Hrs. ?eterswald also confirmed that it was arranged that

the sum of	28 cents was to be allowed	as the cost	of
distribution. However, she said	that	it was	accepteyl

that this cost was not applicable ir. the case of s a l e s to supermarkets. In thelr case, 15 was anticipated that

dlstribution costs would be less than 28 cents a ?:that

Cafix? would be credited with the shartfal-l.

In one respect, namely, t5.e tune ?im:ts cf t h e

agreement, there was a discrepancy in the versions	3;ven
by Mr. and Mrs. Peterswald respectively. AlthouTh	Mrs.

Peterswald recailed a discussion of a five year term

together with two five year options, Mrs. Peterswald	did
not recall any definite conclusion being arrived at	in
this regard.	She thought that it was accepted that this

was something which needed to be left to the solicltors
to work out.

(iii) Mr. Pgwell‘s version

Mr. Powell gave evidence that in his dlscussions with

Mr. Peterswald prior to the Koonya meetlng, he had

informed Mr. Peterswald that, in his opinion, a fair market price for his product on a wholesale transaction

was $1.90 and that Grove’s distrlbutors should receive	a
“margin“ of 15 per cent, that is,	2 8 cents.
Mr. Powell’s version	of the agreement reached at Koonya
was as follows:	(a) Grove’s initial wholesale selling
price was to be	$1.90; (b) Cafike was to recelve frmn

Grwe $1.10 for its product; ( c ) any variatlon to

"price structure" (i.e. Cafike's sslling price to Powell
or Powell's wholesale price) would be the sub~ect of
"mutual discussions" or alternatively would proceed by

"independent arbitration" (according to Mr. Powell, this

term was arrived at as a result of a statement made by

Mrs. Peterswald that Cafike wished to retam "tgtal

control of the wholesale prlce"); (d) the name "Grcve''

would appear on the label along with 'Applemaid"; ( e ) the arrangement was to subsist for five years wiYn two options to renew for peri.3ds of five years each; (f)

Cafike was to bear the promotional costs already

incurred but future costs of promotion were to be shared

equally; (g) packaging costs were estimated at 3C

cents; however, until Cafike had generated sufficient

cash flow to pay for packaging costs,	Grove was to
provide the labels and the cartons	so that Cafike had
only to outlay, in the first instance, the cost	of the

containers (at	2.04 cents each) and the caps	(at	. 2
cents each).

Mr. Powell said that the parties then discussed, in general way, the need to retain solicitors to a

draw up a formal

agreement. There was also talk that Grove might later acquire	an
"equity participation" in Cafike.

A s ha3 been said, it is common ground that some

agreement was arrived at in the Koonya meetirq. But there are

several questions of fact and of law which arise h r

deterinination as to what, if anythlnq, was Iqreed in two	maln
areas	:

(1) the term of the agreement;

( 2 ) the rights, if any, of Cafike in respec% of the wt--olesal~
price to be charged on a sale by Grove.

These questions are central to the preser,t dlspcte.

Before attenptinq to resolve them, ~t is necesyarg	to	describe
the subsequent history of the arrangement.

The course of dealincrs between the parties

(1) Aucrust 1984 to September 1986.
Deliveries of product from Cafike to Grove commenced in

August 1984. The invoiced price available by Grove to Cafike was agreed at $1.323 per container, being $1.10 for the juice and 2 2 . 3 cents for the container and the cap. As from 1985, it was

agreed that the price be increased to $1.37 per unit. m e

increase, of . 0 5 cents, was represented substantially, if not

wholly, by an increase in the costs of packaging. In September

1985, Cafike introduced a "long life" product as well a5 it5

original refrigerated version. Marketed as "Lonqlife Applenaid",

its agreed invoiced price to Grove until	1 October 1986 wa5 $1.51
per unit in the case of "straight" apple juice and	$1.61 for each
container of a mixed or blended type.

It was subsequently agreed that, as from 1 December

1985, the invoiced price of chilled juice increase	from $1.37 per
I	l

13.

unit to $1.44; this price was increased to $1.45 as from 1

January 1986; it appears that these increases were allowed to

cover the cost of the cartons which it was agreed that Caflke

should assume at that stage.

(it) October 1986 to Februarv 1987

Against the background of a number of siTnlFicant

discussrons which took place between the Farties ir. 1986, :he

prices tc be paid by Grove to Cafike were substantially increase?

as f r m 1 October 1986. DetaZls of the ??W pr7-se srr~>cL~re,

which is complicated, will be mentioned later. By September

1986, the packaging costs borne by Cafike	had. increased t n 0.4129'1
cents per unit made up	as follows:

Bottle	$0.2403
Cap	.0213
Carton	.O736
Tape	.Ol
Wrap	.O1
50% label	.031
Neck Label	.O13
Carrying cost	.Ol

$0.4092

In February 1987, the relationship between the parties

collapsed and Caflke ceased to supply its products to Grqve.

The 1986 discussions

(i)   Conversation In late January o r early Februarv 1986

(a) Mr. Peterswald's version

Mr. Peterswald said that in late January or	early
February 1986, he spoke to Mr. Powell in	his offrce

at Grove's premises and informed Mr. Powell that

. 14.

Cafike was feeling conslderable cost pressures in

its operation and "would be very keen	to get.	a
price rise".

Mr. Powell said that he was also experiencing c3st

pressures in orange juice and that he WeUld like to
put his orange juice prices up. Yr. Powell saic!

that he "thought he could not do that in isclatlx

in the market but he theught there would b? a

general tendency during the next few mor.ths for

orange juice prlces to rise. ..Xe would be taking

advantage of that and that would. be a good t m e to

bring apple juice prices up. I [i.e. Fr.

Peterswaldl agreed with his logic."

At this time, Grove was selling the juice to

ordinary retail outlets at $1.90 but, after takir.9

into account rebates and discounts, Grove was

receiving something less than $1.90 from the

supermarkets (Coles, Purity and Roelf Vos).

(b) Mr. Powell's version

Mr. Powell said that he "voiced this3 concern to

Mr. Peterswald at the large volume of funds we were

outlaying	and	the	general	increases	that	the
retailers	had	applied	to	promotional	costs	of
products.	I' Mr. Powell	said	that	he	told	M r .

Peterswald that he "was going to increase the price

of all Grove products". Mr. Peterswald "seemed	te
agree that was necessary . . .	He said he cculz see
that I would have to	do that." Yr. Peterswald's
price was not	discussed.

Mr. Powell's evidence in chi?f cgctizGed a5

follows	:
"%!. BROWN: ...	31d ycu the5 have discuza;ons

with Mr Peterswal.3 with rsspec: to :>.e future of y m r company and his company?---I do not Selieve that we had exhaustLve discussions in January or Febrlarjr o r March

of that year towards that, enc.

Did you subsequently have some dismsslons towards that end?---Yes, not till later cn, but at that stage we were dwelling on price

and I put to M r Peterswald that it w z s

almost two years that we had been - ol;r

price	had	increased	from	Cafike.	O u r
general	costs	had	increased.	had	We

maintained the price for almost two years.

Our promotional costs were increasing and v e

would have to move but there was no mention

of anything else much at that stage ...

HIS HONOUR:  Was there no discussion abcut

figures?---Figures?

When you say, have to move?---Exactitudes. N o , your Honour, all of the work with the grocery trade with working out the margins, the promotional schedules, the promotional moneys was left to me.

Yes, but did not - did Mr Ppterswald ask

what sort of price	movements	were
likely?---I am pretty sure that	I	indicate
that a general price of	10	to 15 per cent

would necessary be to look towards

redressing the erosions we had had	of	the
previous two years.

Erosion vis-a-vis inflation or what?---PI

increases, your Honcur?

Yes. And you did mention that sort of thi7.g

to him, did you?---Yes, your honour."

In cross-examination,	Mr.	Powell	r~ave t h ~ s
evidence :

"You had made a price rharuJ*, . -~~zbhnut

reference at least - and we will cclme b a c k

to discuss	this	In	a mlnute - wlthout
reference at	least to the ,details	of	the

price change to your customers, without

reference to Cafike?-- We had effect4 one price change only in I he whole duratlon nf our agreement and that was effected in Aprll

1986 with tacit approval being obtained and

knowledge of Mr Peterswdld in February	;?f
that year.

But on no version of the facts do you put forward that you consulted Mr Peterswald

with the amount of the price ris*=?---Yes , I

did. I explained to Mr Pet+rswalc! d t that

time that I anticipated that + ~ r ~ z , : e

increase be in the range cjf l? to 1E. c erts."

Later, Mr. Powell added this pnpl3natlon:

". . .I did explaln that i t would be in ttie

region of	10 to 15 per cent and I t h i n k t h a t
I justified the amount of	t h a t increase wher .

I went through the charges	that o u r	company
was absorbing	with Mr Feterswald	. . . "

(ii) Conversation in April 19R6

I

(a)	Mr. Peterswald' s account
In April 1986, Mr. Peterswald noticad that

some supermarkets had Inrrea.s.?d the retall

price of "Applemaid" by 30 t o 30 c e n t s . He

then spoke to Mr. Powel.1 3 5 fnllijw5:

"And what dld you say tr~ Mr Pswell? [. lbLtt

did you put to Mr PowPIl?---T :a:,! t 7 M.

Powell had he seen the> prices I n t!;e

supermarkets; rfld he haw any rerisIIrl day

they were as they were	and ?,e sal4 :J	$9 ,
"I think the supermarkets nust	be	fre1n-j

greedy".
Yes. What else did Mr Powell say to you a s

far as taking the przblem on

board?---Right.	He	said	that	he	wr;uld
approach	the	supermarkets	and	see	: f

something could be done	ahou t	the	p r l r e
rise.

Did Mr Powell say anythinq t o y o u that hr. had increased the whnlesalp pr:ce &lrln,J

the course of this meeting?-- -Ne, no. ' I

(b)	Mr. Powell's verricn
Mr. Powell did n o t have a clear recallertion
of this conversation, althouTh h e d ~ d ret-lll

discussion with Mr. Peterswald about prlrps in May 1986, to which reference wlll b e m?de shortly. However, Mr. Powell acrepted tylat, at about this time, M r . Peterswald raised with

him the price rises in the supermarkets and

Mr. Powell did say that "the supermarkets nu?+

be greedy.

( i i i ) First conversation in Mav 1906

Prices were again discussed at .q verbtlng hrld i r t May I

1986 in Mr. Powell's of f :,:e Setwt'en M r ind M r s .

Peterswald and Mr. Powell. The mret lng t > G k ?la,.?

after Mr. Peterswald discovered, by inquiries made

of supermarkets, that Grove had substantially

Increased its wholesale prlce	- in snme cases by as
much as 15 per cent.
(a)	Mr. Peterswald's accorlnt
According to M r . Pet?r5wald, he 5a12 to Mr.

Powell that he had discovered that Grove ha<l "put the prices up in supermarkets throughout Tasmania. This was done without our knowledge

and we regard it as a breach of the agreement.

We want an immediate remedy to the situatlon."

Mrs. Peterswald asked Mr. P~w+-ll "why had he

done it?" Mr. Powell re~)l~t.~! thal "h.. h,cd

done it because he had not ?,pen rrnk1r i7 murh

money out of the proposllicn. ' I Yr. P~well

accepted that Grove w a s i n bredch ,c,f tr! , ,

agreement. Mr. Prter~;~d!d ' S evl,l?nm:-.

continued as follsws: 

"well, what wa5 then discussed?---I ,nul two options to Mr. Powell, elther t h a t the pricing situation was remedied immediately

and that we return to the margips	that we
had agreed on	- - -

Yes? --- - - - or - we had had previous

discussions on having him equity

participation in the company, whlch was a

mechanism for solving	a lot of this sort
o f - - -
yes? --- - - - potential prohlem, and I	I

said that alonq with the rcpl l ty

participation in the company must come an

agreed pricing structure whlc-h would

did.
reflect margin:; for whdt Grove artually
Yes. Were there any nth+r options p i t t t l
him?---And the third c r p t l o r l wcl? t t rd t I f
neither of thnse were taker1 we 5eprq ted
as from that day.
Right. Now, what d l d Mr Powrll say t.3 those three optlans?---He sald that he was happy to pursue the proposal r l f equlty
participation, that he saw that as the
only alternative f n r us r o r l t x r l u i -
trading.
Right. And could yc.u tell us wkat YOU discussed so far ds equity particlpdtlon
was concerned?---I produced for the
meeting - which I gave to Mr POGJt.l? during the meeting - a series of notes. %c first page of that explained the variation
in margins that he had achieved, ~n most
cases his margin had been double.
Yes. I said that that situation was
completely unacceptable.
Yes?---And the new proposal put to him a
series of pricing structures which would compensate Grove for the actual costs that they incurred in performing the functicn
and would be an integral part of the
equity particlpation, so that equlty
participation had t w o facets to it;
purchase of equity and an understdnding of
the price structure +hat would be
implemented.
Right. Now, could y01.1 tell us, Slease,
what Mr Powell said when you s a l d to hlm
that if you could not reach e q u i t y
participation and retun to the origin31
price structure then you would have to
terminate your relationshlp?---P .e sgreed
to that propositlon."
The notes prepared	hy Mr. Peterswald dealt,
inter alia, with "margins"	and "points of

content ion" as f ol lows :

"ITEM 1 - MARGINS I

1.   Original matglns as at 4 May 1984

Manufacture $1.10 63% 186.5%

Package	. 3 0	18 .5%)
Grove	.2:!	13.5%

2 .   Current margins - Southern distributors ($2.00)

Manufac. & packaqe $1.45 72%

Grove (.5 label) . 5 5 28%

3 .   Current margin - Purity (2.12)

Manufac. Ei	package	$1.45 68%
Grove (incl dcliv.)	.67	33%

4 .   Current margin - Coles ($1.91)

Manufac. & package $1.45 76%

Grove (no dist/whouse) .36 24%

IT" 2 - POINTS OF CONTENTION

1.   The current margins are unbalanced and

do not reflect fair and reasonable

reward for functlons performed. The

agreed prlce of the fresh product has been increased wit,hout reference to P A Cider.

2 . More efficlent means of distrihtlon

exist for many customers.

3 .   The point of sales performance by distributors has been patchy.

4 .   Management decisions effcctinq P A Cider must be made by P A C l c l e r management.

ITEM 3

1. Stemming from th= above, we need to

agree on the resa,lutiorl of these
problems or operate sepdrately.

2 .   Resolution is dependent on Steve having the intention and opportunity of equity participation in P A Clder."

Mr. Peterswald put to Mr. Fowel:, m d Mr.

Powell accepted, that thelr d~scussions ahm,t possible future "equity participatior" was not

to delay implementation of a price r i s e for I

Caf 1 ke . Mr. Powell said that he would,

"within the next month, rectify the pr~ce

situation". A proposed pricing structure uas

suggested in M r . Peterswald's notes.

(b) Mrs. Peterswald's ver51r)n

Mrs. Peterswald's account was in substance in the same terms as that rjiven Sy Mr Peterswald.

(c)	Mr. Powell’s account
Mr. Powell disputes much of the verslorl glven
by Mr. and Mrs. Peterswald. His evlrl?nre was

as follows:

“Do you recall what he said?---Mr Feterswald said to me that he believed the products - the prices of the Grove Apple Mald products

were too high in the supermarkets and

believed that as a consequence my company

must be making too much money out of them.

Did he say that to yml? Ye<;, t h a t i s

correct.

Yes?---And thdt seeing he ?,ad nrit

received an increase tn khe prfr-e trom 115

he thought that that was not fa1 r . I

explained to Mr Peterswald that the p r l c e

that was achieved at retall level wdh	not
necessarily -	the difference between that

price and the price we wete paylrq	1 , l I n	was
not our proflt; there were a	l o t of	other
things that	eroded that	amount, and went

along those lines to t r y and reinf(ircr in

Hr Peterswald’s mind that there wds not an

excessive amount of increase being - had

been applied by our company when we had had

our price increase.

Right. Was there any discussion between

yourself and Mr Peterswald	as to whether r,r	I
not that was in breach	of	any agreement

between you?---Mr Peterswald did not

discuss any breach of agreement at that

stage.

Now, you had the discussion about prlce,

did that lead Mr Peterswald to come tip w i t h

any proposal to you?---Well, Mr. Peterswald

seemed to think - - -

No, I am sorry, did he sdy anything to you?---He said that, there seemed to h? a

problem in us havin9 adjustment.5 ;,f our

margins, in other words his mar7in 1nlght

have decreased whereras now with the price

increase, mlne might have increasd m d

that he thought the only way we could drJ

something about that was either to look a t

simplifying distribution mpthods, several

proposals about distribution, or looklng at

a joint venture, or I think he might have had on his note, going separate ways.

. .

All right. Did he discuss going	separate
ways as one of the matters?---No.
Right.
He brought a note with him to the	offlre,
did he?---That is correct.
Did he give you a	copy?---I believe he left
a copy.
Yes. Did	you read that prior to hav:ng any

discussions with him?---No."

(iv) Second conversation in May 1986

Later in May, another discussion took place in Mr.

Powell's office. It j s romiilnn grcxrnil that. at t h i s

meeting Mr. Peterswald produced a wrltten document

outlining a basis upon which Grove could acquire an

"equity" in Caf ike. Under t,he proposal In the

document, Grove was to pay $25 ,000 .00 immedlately,

and the Peterswalds were to lend Grove $9O,[email protected]

over three years at 14 per cent; repayment could

"take the form of capital injection to the company."

I

(v)   Meetinqs in July and Auqust 1986

A series of meetings were held In July and August

1986 ( 4 and 11 July, 14 or 15 August) between the

parties and their accountants. There was lengthy

and detailed discussion of the financial position of

Cafike and of the terms on whlch Grove might

acquire an "equity" in Cafike. It is common ground

the substance of these discusslons was recorded in

notes made by Mr. D . A . C . McDougall, a chartered

accountant retained by Cafike. These notes and

. .

other evidence indicate that the negotiations

proceeded on the following footing:	( a ) Grove would
need time to examine Cafike's firlanclal	r - e r81 rm3 ' : ;

for this purpose, Cafike's books would be made available to Mr. J. Pastoor, an accountant emFl.;yed by Grove; (b) Grove would have until 1 January

1987 to exercise its "optlon" to take up an "equlty

participation" in Caflke; ( c ) In the Intprlm, Fr.

Pastoor would wrlte	up Cafllrp's honk.; and ,in r - r t a l n
other clerical work	for rafike.

It is also common ground thdt +he part r + < . : q : 1 : 5 w d

that a deal could only be achipvpd I€	satlsf.act?ry
arrangements could be made Tor the acquis:tlnn	of
the shares held in Cafike by	Mr. Hallan, a mlr.orlty
shareholder.

According to the notes kept by Mr. McDougall of the

meeting held on 11 July, Mr. POW-I1 made it clpar to

I

Mr. Peterswald that, Y O f a r a s he (Mr. Pow~lll was

concerned, the negotiations were prnceediv7 aijsint; t

the background of the p a t - t ~ e s ' " :llrrent

-". . .on heads of ATr+ement.. .5 y+?t-\ + c

years + 5 years. To f o r T o this woulr! be expensive.. . .

CMr.1 Powell says he can p ~ t in h 1 ,-,wn pre(>- , . "

On the other hand, Mr. McDouqal:'+ no tes J C 1 4

August meeting quote	Mr.	Powc.l? a n 3 Mr.	D , t t e t - s w a l d
as follows:

b

L

“ 7 . Powell says there must he 3 hlly . - x ~ t f i g l l r e

for Grove not ti, be involved,	Pet+t--wxld	‘ay.,
no value...

B.	Peterswald <>aid that any arrangement made
2-1/2 years ago	could well have been btnken by

Grove increasing the prlre wlthout reference to Peterswald.”

There was also discusslon at these aeetlngs of the increased prices to be paid to Caflke for Its

products. Mr. Peterswald made notes of the August

meeting as follows:

“GENERAL

1.	The purpose of the neetlny was	to	d1.jc.u~~
the trading sltuatlrm	of +P,?	Port	Arthtlr

Cider Company (PAC) wlth a view tc? ~mrrnvln~

its trading terms and Improvinq its .:aplt-,!

situation by the participation ln the

company by	R R & 9 M Pr,wel! P t y r.t;?
(Powell).

2.   It was recognised that the PAS w95 nnt In the capital situation and did not have the

distribution capacity I n 1t.j rurrent f o r m to

undertake a surcessflcl +xpap.slon ~ n t o the production of ciders and c,?rbonated frl~lt beverages based on 3 glL>ss -c+rbcnated bottling line. Powell Indicated. that they

were prepared to enter Into an arranyment

with PAC provided a new corpnrate entity was I

established controlling current PAC

operations and the operation of the expanded
facilities, and that they had the (3ption to

This option was to remain open until 1

purchase a 50% equity in the new entlty.

January 1987 and is calculated on the basls of 50% of the current operation being valued

at $92.500. In the event of additional

plant or capital being placed in the PAC

prior to the option being exercised the price of obtaining 50% equity would reflect the situation. For instance, ~f the

Tasmanian Development Authorlty provldes

capital to the PAC Powell must resume its

share of liability, and If the capltdl 1 s

injected by R K Peterswald, Powell must also

inject a proportiondl amount.

3 .	RESOLUTION:  It was agreed that. a new ?rltity
would be established with Pnwell havlng the
option of purchasing 50% of the shareholding by 1 Jan 1987.
4 .	The current terms of trade Setween  PAC and
Grove Fruit Juices  were discussed. ?he I ,

following was agreed:

(a) COLES

PVC 2 LTR FRESH 2 LTF

Gross	13.20 per cnrton Gross	14.10 per rarton
8%	12.144	Dist 9% 12.83
29 CD	11.90	2% CD 1 2 . 5 7
Grove 6% 11.18	Crav? F,%	1 1 .P1

Freight . 3 7 r r r ight .35

$10.81 per carton $1 l. [)+=L- ,-?!-t,-,r,

Delivered to Grove ( I . A O ) Drllverwl t o C K O V ~ ( 1 . 8 s )

- NOTE : Ordering and invoicing Lhrnugh G:-t-sv+,

distribution P A C j GROVE-CCOLES.

(b)	PURITY
PVC 2 LTR FRESH 2 LTR

Gross 13.20 per carton Gross 14.10

8% wli	12.144	2% TD	13.81
5% TD	11.536	1q% Grovel1	. ? 4 pet- :Artor!

6% Grove 10.84 per carton

Delivered to Purity (1.81) D-..livered to Grov?

m: Orderlng and invoicing through Grove.

Distribution PVC, PAC 9 PURITY:	Fresh, P A C Y GROVE
9 PURITY.

(c) ROELF V0S

- PVC l

Gross	12.90
8% DISTR	11.88

6% Grove 11.17

Freight . 3 7

10.80 per carton delivered to Grove

- PVC FRESH

Store

12.30	Vendor	12.00
Grove 10% 11.07 (1.84)	11.04 (1.84)''

Mr. Peterswald's account was	that the new prices were to
come into effect as from 1 September 1906.	In fact., thls

?6

was delayed and the new prices were not implemented 1inti1

1 October. For that month and November and December

products were supplied by Cafike and paid fnr by Grnv+ at

the higher rates. Products were also supplied to Grove ln

January and February 1987. Caflke involced Grovc~ for

these products at the new prices but Grove paid only part

of the invoiced amount and refusprl to pay tkre halance

because, in February, negotiations fijr th? acytisitian of

"equity" by Grove	rollapsed	In	rircumstances	to	be
mentioned shortly.

(vi) Discussions in Januarv ,incl Fphrlmry i 4 f l 7

(a)	Mr. Peterswald's verslm
There were a number of meetings betweer! the par t1e5
after the discusslnns in July <\nd A u q u s t 1486.
According to Mr. Peterswald, in November 1486, Mr
Powell informed him that he "saw no reason why he
would not proceed with the opt-lon" On 15 Jdnuary

I

1987 Mr. Powell said that he would make "a once and

final" offer of $25,000.00 f o r Saflke Mr .

Peterswald told Mr. Powell that he found the Qffer

"insulting". Mr. Powell replied thdt the trading

figures over the prevlous	six months	d l d not	l u s t l f y
the price of	$90,000.00 previously	dlsc l l s srd .	(In

fact this figure had been altered t c $87,75n.nC to

allow for the buy-out of Mr. Hallam's shares. M r .

and Mrs. Peterswald had acquired W. Hallam's shares at	a
m t o f $16,000.00 in October	1986). Mr. Peterswale then

L

said that cash flow had sufferrd in recent t 1 w 5

because it had been used	t o f i n a n c e the development
of two new products - "Tasman Scrumpy"	,1nd "Ta5manicm
Cider Cooler".	Mr. Pett-rswald t.hen Indicated that hi'

was not rejecting Mr. Powell's offer a t tklat 5taqe

and that he would l i k e to think a h w t 1 k .

Mr. and Mrs. Peterswald	t h e n w+nt away	[sn	h o l i d z y s .
In late January or early	Fehnary,	Yr.	P r t e r 5 m l d
informed Mr. Powell that he had s t l l l not mad.c I	I	his	~
mind on Mr. Powell's offer	bllt	that	h? w a s still

unhappy about it and that he would ask M r .	McDougall
to "look over the figures".
On 19 February, Mr. Peterswald	remlndec! Yr. P z ~ ~ l l

that he had not taken up the parlier opt.1.3n ancl informed Mr. Powell that h1s cffer nf $1)5,nOO.(?n was

rejected. Mr. Peterswald als*-, said 'hat he : i rnpn$eil

to lease distribution of "Applemaid" tc Grove frmn 1

I

March. Mr. Peterswald rnnflrmed 111s p>siticm by

letter	to	Mr. Pow~ll dated 19 Fr.brl~,%ry in	the
following terms:	"I wish to confirm my verbal advice of today.	As

from 1 MAR 87 I intend to cease distr~k~uti~m of

'Apple Maid' products throuqh Grove Frult Julces,

as it appears that we cdnnot	put.	irl p l s r e	an
agreement which:

(a) Maintains the pricing str11cLut-e on which

our arrangement was hased. I t remalns unacceptable to me that a significant c?,,tn;Je !n the price structure of our product was arb~tarily

introduced by you. without reference to W ,

resulting in the complete corruption of the

agreed margins.

(b) Ensures adequate loyalty t n tke 'Apple

Maid' brand. It is not acceptable t h a t you are

in a position of promotinq	a brand in competitlon
to ours, and to find	that prnduc-t rpplac lnr~ ,-burs
in specific markets.
Should you wish to discuss	contlnlled dlstrlbution

under arrangements which are compatihle with

those which we had agreed	I wlll be happy t.o hear
from you.

As far as our production of Mr Julcy produrts is

concerned, I have no wish to disrklpt y m r supply and will be happy to discuss this if you should wish. ”

(The reference to Mr. Juicy 1s to another product In respect of which the parties entered Into ;i separate

arrangement in August or Sppt emter 3 C ) R F . ) .

Mr. Powell agreed substantizlly with Mr.	Pe:erswh!d’:
version of their mPet in3 nn	1 5 Janluary. !inwevet-, Mr

POWell’S account of the di?.i.:issinr, < , r 19 F+t,!-Ilary

differed from that glven by Mr. Peterswald. Mr.

Powell’s evidence was a5 follOW5:

“Mr. Peterswald told me that rlegotlations had been

concluded with another party f o r the sale of the

50 per cent of Cafike and that we would not be

receiving product as at the end of that month,

which was the end of the followinrJ wepk, And that

he would be doing the distribution and that the

50 per cent of Cafike that	we were negotlating
about had been sold	to others.

What did you say in response to that?---Well, I

was incredulous and - - -

But what did yor: say?---Hell, I asked Mr

Peterswald whether there was any posslbllity of

redemption from this position.

Yes?---But Mr Peterswald was quite adamant that the sale to other parties of the 50 per cer~t we were looking at had heen roncluded and that ?h?tz

was no possibility of any redemption of the

situation and that he might be prepared only to look at packaging our Mr Juicy apple juise and

apple and blackcurrant juice.

Yes?---And I said to Mr Peterswald that would he

please put it in wrltlng, that I was totally

incredulous and I believed him to be an

honourable gentleman and I did not thmk he would

live with himself after takinq that course of

action. I‘

.

(Vii) Hr. Powell'e memorandum dated 23 February 1987

On 23 February, after the relationship between the

partiee had collapsed, Mr. Powell prepared a

memorandum setting out his version of the history of their dealings. The document was apparently prepared

with the object of providing retailers with	Grove's
point of view.	The memorandum was not sent to Mr.
Peterrwald but he did see	it under the circumstances

described by Mr. Powell in his evidence as follows:

"Did you give that letter to Mr Powell or what did

you do - Mr Peterswald or what did you do with

it?---Yes, I gave it to Mr Peterswald and Mr McDougall to read while I was there and - or

while they were in my office and - which they

proceeded - they read it and Mr McDougall was

going to take it but	I asked him to leave it
there and I had circulated those	to other areas

and rather than post it I did believe that M r Peterswald got a copy of it so - plus it was -

amongst the documents it should have been

dircovered eo - but Mr Peterswald and Mr

McDougall sat down and read the contents of that letter in my office."

The memorandum was as follows:

l

"GROVE APPLEHAID PRODUCT - DEVELC'MENT -

,S ' I

MARCH 1984

R.K. Petersuald, Director Cafike Pty. Ltd. approached myself at

210 Collins Street re Czovs Fruit juices being willing to

distribute their Port Arthur Cider C O ' s	apple juice product
"ORCHARD PRESSED APPLE JUICE."
Grove Fruit Juices declined becabLe:-	1

a )	product needed improving wlth special attention	t o ensur-
i n g product life-spar..
b )	product/labelling, packaging and presentatlon	sub-
a tandard.
c)	Grove	Fruit Juices needed sole distribution rights to gain

full aarket penetration with orderly marketing. 0 8 ,

d ) Grove Pruit Juices was considering purchase option on cool r o q s , pecking sheds and orchards i n Huon Valley Por

pressin6 an0 packaging fresh apple juice.

--A-- - - __ .

Hr. P e t e r s u a l d urns advised tha t a l though he had been r e j e c t e d

by our i n d u s t r y compet i tors , we might be i n t e r e s t e d i n a

mar~ufacturor/di~tr ibutor agreement shculd he w i s h t o implement

a, b and c above i n a joint	venture	pr	.oduct	as	we	be	l i eved	i n
and	were	cur ren t ly	working	towards	re leas ing	a	f r e s h	apple

ju i ce .

Hr. Peterswald rever ted severa l week: l a t e r t o t h e e f f e c t t h a t

Caf ike P t y . L t d . were very interestee i n pursuing,? manufacturer(

d i s t r i b u t o r j o i n t venture product and B meeting was held a t

Koonye i n A p r i l 1984 f o r the purpose of formal i s ing the agree-

ment. Hr. and Hrs. R . Peterswald were present on behalf of

Cafike P r y .	Ltd.	and	myself	on	behalf	o f	Grove F r u i t	J u i c e s
( T a s . )	The following	minutes	were	tdbled	and	agreed	upon	b y

a l l p resent : -

1 ) A j o i n t v e n t u r e a p p l e j u i c e p r o d u c t "GROVE APPLEMAID"

would b e conceived.

Caf ike Pty..	L t d .	t o be	producer/mdnufacturer,	Grove F r u i t
J u i c e s	( T a n . )	t%be	so l e	pu rchase r /d l s t r ibu to r .

Hanufacturer/distributor agreement for period of f l v e

y e a r s , u i t h , t w o f i v e y e a r o p t i o n s .

P r i c i n g - Product Sale pr ice from Cafike P t y . L t d . and

Grove F r u i t Ju ices ' wholesa le p r ice was s e t a t m e e t i n g .

Var ia t ions t o be r e s u l t o f primary, market or o t h e r

p e r t i n e n t f l u c t u a t i o n s . I n a b i l i t y t o agree was t o be

decided b y i ndependen t a rb i t r a t ion .

51 I n i t i a l l a u n c h c o s t t o be paid b y producer. Ongoing

promotional costs to be shared 50% Grove F r u i t J u l c e s , W

50% Car ike.

6 ) Grove F r u i t Ju i ces (Tas .1 t o pay f o r I t s products 30 days I

from s t a t emen t i s sue .

Under t h e d i r e c t i o n o f Grove F r u i t J u i c e s ( T a s . ) Grove Apple-

maid pbpparat ion and p resen ta t ion was completed i n Ju ly 1984.

F i g u r e s ' f o r Grove Applemaid purchases b y Grove F r u i t J u i c e s

n inco incept ion f o r the two year perlod following are as

f0llOUS 1 -

PERIOD A V E R A G E MONTHLY TOTAL P E R I O D PURCHASES

PURCHASES

PUG '84 - DEC '84	$ 7,037.9.1	$ 35,189.56
J A N '85 - JUNE '85	$17,223.70	$103,342.22

JULY	' 85 - DEC ' 8 5	$26,956.90	$161 ,741.45
J A U	' 86 - JUNE '86	$32,552.98	$195,317.92

Grove F r u i t Ju ices d i sbursements f o r development and promotional

suppor t over t h e same period:-

. .. -

PERIOD PROMOTIONAL PREPAR TION OF ARTWORK

EXPENSES P L A T E A OLING AND'O~LABELS

AUG '84 - DBC '84 $ 5,544 * $ 2,328 * *

JAY '85 - JUHC '85 . $ 5,232 $ 3 ,301

JULY '85 - DEC '85	$ 5,392	$ 10,397
JAN '86 - JUNE '86	$ 7,245	$ 6,916

Cafike P r y . L t d . i nvo iced fo r 50%

0' Caf ike P t y . L t d . i nvo iced fo r $3,860 o n l y .

P R I C I N G

Grovo F r u i t J u i c e s ( T a s . ) d i d not vary i t s uholesf i le selling

price f o r 24 months from those decided i n A p r i l 1984. The

p r i c e of apples remained constant during tha t pe r iod , p roduc t ion

u n i t s f l o u r i s h e d , b u t Cafike P t y . L t d . increased i t s s a l e s

p r i c e s i n August 1985 and January 1986, a l b e i t t o a t o t a l of 5%.

I n January and February 1986, Mr. PetersWald was advised of

the	l a r g e	i n c r e a s e s	i n	p romot iona l	cos t s ,	and	t h e	n e c e s s i t y	t o
p rov ide	fo r	them	to	adequately	increase	our	market	share .	In

March 1986 I advised Mr. P e t e r s u a l d t h a t I would be i n c r e a s i n g

t h e uholesale s e l l i n g p r i c e of a l l Grove products and implemented

d u r i n g A p r i l 1986. Since __ launching Grove Applemald products

. n e a r l y t u 0 yoara previous Grove F r u i t J u i c e s had absorbed the

fo l lowing incroasoa o rder to ga in maximum m d r k e t penetracion

ror	its product r .
1 ) '	. C a f i k o P t y . L t d . i nc rease - 5 %

2 ) Succoas fu l pene t r a t ion of grocery t rade b u s i n e s s dur ing

provioua 2 4 m o n t h s IColes , P u r l t y , V o s l m e a n t p a r t i n g u i t h

c r ed i t s fo r t he i r warehous ing , t r ade and s e t t l e m e n t

d i scounts ranging from 5% t o 14%. These cos ts uere borne I

s o l e l y by Grove F r u i t J u l c e s .

3 ) Pressu re o f i n c r e a s i n g Grove Appleoraid sa l e s necess i t aced

i n c r e a s e d r e f r i g e r a t i o n c a p a c i t y i n H O b d r t and warehouse

f a c i l i t i e s i n Launces ton for Nor thern d l s t r lbu t lon d t 5%

c o s t t o Grove F r u i t J u i c e s .

4 ) Servicing of Roelf Vos s t o r e s in North West of s t a t e

n e c e s s i t a t e d 5% f r e i g h t i n g r e d i e n t t o f o r w a r d t h e s e

p r o d u c t s t o d i s t r i b u t i o n SyYteffl.

4

5 ) Grocery t rade (Coles /Wooluor ths) increase In promotional

charges ( 5 0 % - 100%) coupled u i t h the need t o promote

more vigorously (June 1986 t o December 1986 promotional

I disburaements b y Grove F r u i t J u i c e s t o t a l l e d $14,751.76 -

provious ha l r year uas $7,244.64.1

I n A p r i l l986 Grove F r u i t J u l c e s . i n c r e a s e d I C S u h o l e s a l e p r i c e

of c h i l l e d a p p l e j u i c e by 15%, b u t d idano t l nc reabe t he p r l ces

of i t s PVC ju i ces t o t he g roce ry t r ade a s I t u a s s t r i v i n g f o r

marke t pos i t ion .

In Hay 1986 Hr. Peterswald challenged the nacesslty for the implementation o f the aforesaid increase and was advised of our initial agrooment to preserve respective margins. MP.

Peterawald atate0 that he believed t h d t our price increase would disadvantage sales, uhich has n o t been the case. ~h~ praceding TeaaOnS 1 to 5 uere explained to Mr. Petersua$d i n

justification of our chilled apple juice increase. l

l

A t this time Cafike Pty. Ltd.	was experiencing cavh flow
shortages deapite Grove Fruit Juices	n o t only adhering t o
agreed purchaserls trading terms but also	giving 50% of
within 14 days of i ssue .
It was jointly resolved between Mr.	Petersuald and myself that

concummation of much discussed equity partlcipdtlon b y Grove

Fruit Juices was the logical step to pursue to assist ongoing

pricing structures and cash f l o w s .

It was resolved in June 1986 that for Grove Prult Juices to

obtain equity in Cafike, a minor shareholder uould need to be

purchased by R. and R. Petersuald enabling them t o remain

50/50 on equity with Grove Frult Juices in the Ben entity. ~t

was also agreed that a balance sheet and profit and loss accounts

for that year were needed to ascertalri the 50% purchase prlce.

After several meetings involving directors, accountants,

financial and legal advisers of both Gorve Frult Juices and

Cafike Pty. Ltd. a heads of agreement for Grove Frult Juices' purchase o f 50% of Cafike Pty. L t d . uas flnalised as followb:

A three month period - October, November and DeCt.Nb'e!r 1986

(inclusive) was given to Grove Fruit Juices to appraise the

financial status of Caflke as stated b y h . Peterhuald, With

Grove F r u i t Juices to do all accounting work PerLdlning	t o
Cafike.	his was necbasary as there uas dissentlon concerning
Hr. peterswald's projection of an estimated stock Value	1
(surplus above	liabillties against assets) as at the end of
assessment at 31st December,	1986.

On the basis that Mr. Petersuald's projection proved correct

(and that Caflke's nett uus as stated t o be $90,000 per annum)

purchase price was agreed upon for Grove Frult Juices' 50%

of Cafiko as follows8-

orov.	Fruit Juices' capital payment O F $25,000 W l t h a further
capital liability of $45,000 to be paid within 36 months	w i t h

14% per annum to b e paid on interim Ddlance. Thia was a

concessional price to take into conslderdtion t h a t Grove Fruit

J ices would cede i t s ~ o i n t venture status over the Grove

Applemaid products ln favour of i t 3 50% equity	I n the neu
production/distrlbutlon company.
Grove Fruit Juices u o u l d relinquish lts	then current dlstrlbutlon

and mahketing margin to operate on a purely marginal rate ln

order to fully maximise returns to the new company.

These concessions in distribution and marketing margins uere

affected in October 1906 on the totally accpeted and intrinsic

L' undertaking by both purties that negotiations uould b e pursued

and consummated fully on the aforesaid basis.

. .

I n mid January 1987 Mr. Peterswaib was adv i sed t ha t Ca f ike ' s

o p e r a t i o n s fo r t h e prev ious s i x months had o p e r a t e d a t a loss,

an0 t h a t there would n o t be a s u r p l u s of a s s e t s o v e r l i a b i l i t i e s

a s a t 1 s t J a n u a r y a s p r e d i c t e d .

Mr. Peterswald was asked to s u b m i t ou r f i gu res fo r t he pe r iod

monitored t o h i s a c c o u n t a n t f o r s u b s t a n t i a f l o n .

Should Mr. McDougall be u n a b l e t o f i n d e r r o r i n our estimation

of Cnfike's f i n a n c i a l p o s i t i o n a s a t 1s t January 1987, .I,

e s t i m a t e d	t h e	c a p i t a l i z a t i o n	s h o r t f a l l	of	Cafike	to	be 965,000
less	t h a n that	promised	b y	Mr.	Pe te r sua ld on	agreement	for

purchase.

In l i g h t of	Mr.	Pe te r swa ld ' s	ove r s t a t emen t	o f	Ca f ike ' s	pos i t i on ,
our 50% purchase	o f f e r	was	reduced	accordingly	to	$25,000. Mr.

Peterswald had a l s o r e c e n t l y d i s c l o s e d t h a t ue would be j o i n t l y

l i a b l e f o r a $ 7 0 , 0 0 0 T.D.A. a d v a n c e t o a s s i s t i n the new

venture 's development .

Mr. Peterswald was asked to have our account ing of Cafikels

performance and o u r r e v i s e d o f f e r v e t t e d a t h l s e a r l l e s t

o p p o r t u n i t y , so t h a t we migh t f i na l ive t h e c o s t of our mutually

committed f u t u r e . ,.

Hr. Peterswald under took to assess the nego t l a t ions p receding and d i s c u s s

h i s r i n d l n g s w i t h	a	v i e w	to	f i na l	be	ing	conc	luded
a t a	meeting	or	d i r e c t o r s	and	a c c o u n t a n t s	a t	210	C o l l i n s S t r e e t

Hobart on Fr iday the 2 0 t h of February 1987.

Hr.	Pe terswald ,	however	,	ca l led	a t	Grove	F r u i t J u i c e s on	Thursday
t h e 1 9 t h of	February	and	advised	tha t o thers .	Caf ike	had	concluded	8

n e g o t i a t i o n s t o s e l l 50% of Caf lke to He a l so advlsed

of c e s s a t i o n of a l l p r e v i o u s commitments and was asked to

c o n s o l i d a t e h i s r h e t o r i c i n u r l t t e n form , u h l C h was received

on Monday 23rd of February (a t tached . )

Paragraph I b l of h i s l e t t e r m u s t p e r t d n t o t h e f a c t t h a t

Orango Investments Pv. L t d . of which I a l s o am a d i r e c t o r

acqu i r ed t h e Tasmanian opera t ions o f M r J u i c y t w e n t y m o n t h s

ago - w i t h a s soc ia t ed p roduc t s and d i s t r i b u t i o n s y s t e m . O u r

Grove	F r u i t	J u i c e s d i s t r i b u t i o n	s y s t e m	has	n o t	d l t e r e d a p a r t
f rom	progreasing	(as	can	be	seen from f l g u r e s on	page 2 ) and

def in i te ly does no t handle any producrs i n compet i t ion to our

Grove Applemaid commi tment.

. ..

~ h o r o p r o d u c t a L n f e r r e d i n p a r a g r a p h ( b ) a r e I n t e g r a l t o our

nr J u i c y buainoas o n l y , a n d a r e d i r e c t e d s p e c i f i c a l l y a g a i n s t o u r

c i t r u 8 b a s e d c o m p e t i t o r s . They have no t been lmp lemented in to

the g r o c e r y t r a d e .

Mr J u i c y ' s m a r k e t i n g Of i t s l o n g - l i f e p r o d u c t r d r l g e a t c o r n e r

s t o r e l e v e l o v e r t h e past two months has been a s s i s t e d by: -

a ) C a f l k e ' s l a c k o f p r o d u c t i o n q u a l i t y COntPOl d u r l n g

m n n a g e r i a l a b s e n c e m i d t o l a t e 1986 r e s u l t i n g i n

c o n t a m i n a t i o n	a n d u n s a l e a b i l i t y	of	o u r	Grove/Applemaid
p t p d u c t s .

b) L a b e l l i n g of G r o v e / A p p l e m a i d l o n g - l i f e p r o d u c t s . C a f i k e

w e r e d i r e c t e d t o v a r y t h e i n i t i a l o n e l a b e l c o n c e p t t o

i n c o r p o r a t e	i n d i v i d u a l	f o r m a t s	b e i n g	d e v i s e d	f o r	o u r	proven
'	f l a v o u r	b l e n d s .	O u r	C r o v e d i s t r l D u t i o n	s y s t e m	h a s	b e e n

armed wi tn p o i n t of s a l e m a r k e t i n g s t a n d s a n d s a l e s r a c k s

and	is	c u r r e n t l y	a w a i t i n g	t h e	i m p r o v e d	p r o d u c t s	a n d
fo rma ts	f o r	a	m a r k e t i n g push'.	M r .	P e t e r s w d l d	i s	w e l l

auare of t h i s a n d h a s a p p a r e n t l y b e e n " s i t t i n g " o n t h e s e

m u t u a l l y a g r e e d u p o n p r o g r e s s i o n s w h i l s t h e h a s b e e n

under tak ing and COnClUd in& negotiations e lsewhere . As

M r . P e t e r s w a l d h d s b e e n l l a s i n g w i t h a r t w o r k d e v e l o p m e n t ,

G r o v e F r u i t J u i c e s h a s b e e n p r e s s i n g h i m c o n s t a n t l y f o r

t hese new f o r m a t s t o be p resented s ince December 1986 .

Grove F r u i t J u i c e s ( T a s . ) h e r n o t w d v e r e d o r v a r i e d i n i t s

commitment made wi th C a f i k e i n A p r i l 1984.	It	h d s	n o t	g e c e i v e d
o n e c o m p l a i n t	o n m a r k e t i n g o r	d i s t r i b u t i o n	f r o m	i t s g r o c e r y

t r a d e c u s t o m e r s s t a t e w i d e , n o r f a i l e d t o f i l l a n o r d e r w i t h i n

24 hours of r e c e i p t , s i n c e i t e v o l v e d i t s G r o v e A p p l e m a i d

p r o d u c t s .

Grove F r u i t J u i c e s (Tas.1 has no t wavered i n i t s u n d e r t a k i n g

t o p u r s u e n e g o t i a t i o n s f o r t h e p u r c h a s e o f p r o m l s e d 50% o f

C a f i k e P ty . L t d . , a n d h a s p a s s e d o v e r f u l l y I t s a g r e e d c o n c e s -

s i o n s t o w a r d s f o r m a t i o n o f t h e j o i n t v e n t u r e company. M r .

P e t e r s w a l d through h i s s h o r t - n o t i c e d c o r r e s p o n d e n c e h a s d i s -

honoured his i n i t i a l a g r e e m e n t , a n d a l s o h i s m o r e r e c e n t u n d e r -

t a k i n g t o c o m p l e t e n e g o t i a t i o n s with Grove F r u i t J u i c e s ( T a u . ) ''

(viii) Threats of litisation

On 25 February 1987, Mr. Peterswald wrote to Mr.

Powell in these terms:

"I refer to my letter of 19 FPb 87, In which I

sought clarification of certain matters.	To date
no reply has been receivpcl.

All orders for products wlll now m l y 3e recelved

through our Hobart offlce, locatFt? at the above

address. In view	o f my advice to ynu, all Apple
Maid orders would need to	be accompmled by order

numbers from respective retallers.

As regards Mr Juicy products, you wlll apprec~ate

that your lack advlce of regarding your

requirements or otherwise, crrates difficulties in planning production. Should you require Mr JIIICY

products, I reinterate (s1c) that I am happy	t(J
discuss the matter."

On 26 February Cafike's solicitors wrote to Grove's solicitors as follows:

"We are instructed	that the Manager of Port Arthur
Cider Company Pty.	Ltd., Mr. R.K. Peterswald,
wrote to your Mr.	Powell on the 19th instant

advising your client that the distribution of

Apple Maid products through Grove Fruit Juices

would cease from the 1st March, 1987.

l

Our client intends ceaslng to use any labels or packaging containing the word 'Grove'.

We write to request that your rlient refraln from

using any labels or packaglng contalnlng the words

'Apple Maid'. W+ tinderstand your client's

practise has been to order bottles and labels. It

will consequently be necessary €or him to

re-arrange labels and packaging to exclude the

words 'Apple Maid' as appropriate. Could you

therefore please advlse your client accordingly
and communicate with us if there are any remaining
matters which need dlscussion or clarification."

On the same day Grove's solicitors wrote to Cafike In these terms:

"As you are aware we act for Grove Fruit &Tuices

(Tas) Pty Ltd. We understand you have glven

notice to our client determining the distributlon

agreement with our client reqarding the

"Apple-maid'' products. We are currently advlslnq

our client with respect to his riqhts of artion

regarding the early determinatlon of that

agreement.

In the meantime we advlse that should y o u

distribute your product utilisin9 the label	upon
which our client's name and	mark "Grove" and o11r
client's APN codes appear we	will lmmediately and
without further notice to you obtain an	in~unction

prohibiting further distribution. In addition

to obtaining an injunction preventin9 distrzbution

utilising that label we shall also seek earaGes

in relation to the same. A similar posltlon

applies with respect to the new	lahel developed
jointly and between yourselves and our cllent	"

On 4 March 1987, Cafike's solicitor5 wrote to Grove's solicitors as follows:

"Further to our client's letters to your client of the 19th of February, 1987 and of the 25th of February , 1987 we have not had any request from

your client to supply it with our client'c,

products except that yesterday you asked the terms

upon which our client would be prepared to supply.

Our client's terms are as follows:

1. It will supply fresh Apple Juice at $11.98

per six cartons and its Longlife Apple Juice

at $12.12 per six cartons. It will also

provide the Mr. Juicy Apple Juice and the Yr.

Juicy Apple and Blackcurrant Juice at a price agreeable to our client depending on your

clients requirements. The prices quoted are

those to which our client presently agrees

which prices are subject to alteration by our
client from time to time.

2.    Quantities would have to be agreed between

our clients as would times and places of

delivery.

3 . 1mmediat.e payment nf t2he balance of the

January account which is now nverdlle.

4 .	Your clients agreement to pay the February
trading account, half in the nlddle of this
month and +.he balance a t the end of this

month without deducl-iot:.

5.    Your client would be free to mark up the product purchased as he wl5hes.

6 .	The product supplied to your client may
display the word "Grove" dnd your clients bar code and if your client wishes this.
7.	This agreement is of indefinite duratim and

may be terminated on reasonable notice.

8.    The product sold to your cllent under this

agreement must he paid f n r In r a 5 h nn

delivery.

9.   This agreement is not dn exclusive agreement

to supply. "

The offer was rejected by Grove's sollcltors.

On 4 March 1987 Grove commenred proceedings in th19

Court (No. TG2 of 1987) seeking to restraln the use

by Cafike of the word "Grove" in relation to frult

juices.	Interlocutory	relief	was granted in	that
matter.

On 18 March	1987	the	present	proceedings	were
commenced.	In	these	proceedrngs	Grave	has

cross-claimed on a number of alleged causes of actlom

including the claim f o r relief made ~n proceedings

TG2 of 1987. At. the concluslam of evldence in the

present proceedings, on 29 April 1388, by consent I

dissolved the existinq interim injunction in

proceedings !!X2 of 1987 and ordpred that those

proceedings be dismissed but noted that this

dismissal was not	to constitute a dismissal on the
merits of Grove's claims and in particular was not	t o

prejudice Grove in resprt of Its cross-claim in the
present proceedings.

.

38.

A. Cafike’s claims in the proceedinss causes of action.

It will be convenient to deal with them separately.

(1)    Cafike’s claim for the price of soods sold and delivered

in Januarv and Februarv 1987

Cafike claims for the price of product delivered in

January and February  as follows: 

Januarv 1987 

3843 (Cartons of 6 Applemaid) @ base

price $9.60 $36,892.00

Plus agreed add ons from various

supermarkets as per January account	3,255.00
Plus 130 Hr. Juicy cartons @ $5.60	720.00
Plus agreed Coolers	270.00
Plus agreed adjustment for Kokavesis
deliveries in previous months	460.80 $41,605.80
Less agreed adjustment as per
January account	4,373.11

$37,232.69

-	Less amount paid	$19.000.00
Total claimed for January	$10,233.00
Februarv 1987
1983 (Cartons of 6 Applemaid)
13 $9.60	$19,036.80

Plus 138 Hr. Juicy cartons @ $5.60	772.00
Plus agreed add ons for various supermarkets -

.

39.

Coles	21.85
Coles fresh	322.14
Purity	696.90
vos	128.04 $20,977.73
Plus Total January	$18,233.00
Total claimed for January and
February 1987	839.210.73

Cafike also claims i r l L c r c s L UII L h i b U U U U I I L .

Grove's defence to this claim is that only the sum of

$28,568.00 is owing for the following reasons. Grove accepts that goods were sold and delivered as claimed by Cafike but contends that Cafike's prices were increased as from 1 October 1986 only upon the condition that Grove would receive back one-half of the increase.

The issue here is whether the term or condition contended for by Grove was, in fact, agreed to by Cafike.

least, the parties were anticipating that Grove would	It may be accepted that in the latter half of 1986 at
exercise its option to become an equity participant in Cafike and that a joint venture arrangement of that kind would be "consummated". However, I am not satisfied that
Hr. and Hrs. Peterswald agreed to any profit-sharing with
Grove before such "consummation" occurred. The conclusion of a joint venture arrangement may have been thought to be

.

likely but it was never regarded by anybody as a certain

thing. Grove was given an option to take up an "equity" at a price of $87,750.00.	It was not bound to exercise
this option.

The parties must have contemplated the possibility that Grove would not exercise its option. Nonetheless, some arrangement had to be made in the interim to deal with the prices to be paid by Grove to Cafike for product. Grove had increased its price and, to that point, Cafike had not, apart from increases in packaging costs.

On behalf of Grove, it is accepted that no express agreement uas made that the increase in Cafike's price was conditional upon Grove receiving back one half of the increase. The suggestion is that the Court should infer

such a condition from the whole of the circumstances.

In my opinion, such an implication should not be made. It is clear that the parties contemplated the possibility

that no joint venture arrangement might ever come into

existence. That being so, the interim arrangement as to

price which was put into operation from 1 October 1986 must have proceeded upon the express understanding of all concerned that it was at least possible that Grove would never participate in any profit accruing to Cafike from the payment for product at a higher rate. It must be

borne in mind that Grove had increased its wholesale price

from April 1986. From that time at least, Cafike was

.

41.

seeking to increase its price and its claim for a higher

price had been deferred pending the negotiations which

occurred between the parties. In August 1986, it was

agreed that a price increase should be granted to Cafike.

It was first thought that this could be implemented by 1

September 1986 but, a3 it turned out, it could not be

implemented until the following month. Thus, although

Grove had increased its price in April 1986, Cafike had to

wait for six months before it received its increase.	In
those circumstances. it is	not unlikely that the parties

would have proceeded on the footing that, as an interim

arrangement, Cafike should receive its higher price

without any condition a3 to accounting back to Grove for

a share of its profits being attached.

It is unlikely that Mr. Peterswald would have agreed to	a
condition of the kind now suggested.	In the first place,

as has been said, Cafike had seen its price rise deferred

for some months while Grove had had the benefit of an

increase in price for a considerable period .

Moreover, the cumbersome and indefinite nature of the

condition now contended for indicates improbability

that it was agreed upon. An effort was made in argument

to suggest what would be a suitable division of profit for

this purpose but any solution is open to debate as an

attempt to arrive at	a fair and equitable distribution of
profit as between the contracting parties.	It is more
likely that,	in the bargaining that occurred in August

1986, Mr. P m 1 1 agreed with Mr. Peterswald that as an

r

interim solution only (that is while Mr. Powell was considering whether he should exercise his option to take up "equity") Cafike should receive a higher price for its product;and that the receipt of this price should be free of any obligation to account to Grove for any share of profit accruing to Cafike in that respect.

In the result, I uphold the claim by Cafike in respect of

the month of January in the sum of $18,233.00 and in respect of the month of February in the sum of $20,977.73.

In each case, the claim should bear interest. It is

agreed that an appropriate rate of interest is 14% per annum. The amount of interest on $18,233.00, calculated on a daily rate from 1 February 1987 until 25 May 1988, is

$3.356.87.	This makes a total of $21,589.87 in respect of
the claim for January 1987.	The amount of interest on

$20,977.73 cdculaloci OII U daily rate from 1 March 1987

until 25 Hay 1988, is 03,636.91. This makes a total of

$24.614.64 in respect of the claim for February 1987.

(ii)

Cafike's claim for Product delivered and not accounted for	In February 1987, 1983 containers of juice were supplied
disclosed that it was possible to trace the distribution by Grove to various outlets of all but 475 cartons of product. Cafike claims that it should be inferred that these cartons were In fact distributed to supermarket
outlets in which event Cafike would have been entitled to
an average "add-on" of $1.51 per carton. Alternatively,

by Cafike to Grove. Discovery of Grove's records

. 43.

it is contended on behalf of Cafike that it should be

inferred that one half of these cartons (237 in number)
were distributed to supermarket outlets.

It is true that it is common ground that approximately one half of the distribution of "Applemaid" by Grove was to supermarkets. However, Cafike bears the onus of making good this claim and I am not prepared to draw either of the specific inferences suggested by Cafike. It is possible that the product in question could have been distributed to other outlets and the general evidence of

the	distribution of business overall is not, in my
opinion, a sufficiently safe guide for this purpose.	It
is said on behalf of	Cafike that this is a matter within

the exclusive knowledge of Grove. On the other hand,

discovery of Grove's records was given to Cafike.

I am not satisfied that this claim has been established and it is accordingly rejected.

(iii) Cafike's claim for damases for breach of contract or for

breach of fiduciary duties under an allesed loint	venture
arransement (paras. 6 and 7 of	the amended statement of
claim1
In the anended statement	of claim, it was contended on

hehalf of caf,ike tl-at the marketirsJ arrangements arrived at

between the parties at Koonya had been breached by Grove. The breach consisted of Grove increasing its price without fully informing Cafike of its intention to do so. It is

.

44.

common ground that in March 1986, Cafike increased its prices, such price increase to be effective as from April

1986. In the amended statement of claim (para.61, Cafike

claimed damages for breach of contract, alleging that	it
had lost the opportunity to raise its price	accordingly.

In para.7 of the amended statement of claim, Cafike put this claim in an alternative way, alleging that the arrangement arrived at in the Koonya meeting should be regarded as a joint venture giving rise to fiduciary obligations. It was said that Grove was in breach of its fiduciary obligations by increasing its price without fully informing Cafike; Cafike accordingly claims an account of profits in this behalf.

The questions, first, what were the terms of the Koonya

agreement and, secondly, whether there was any breach of those terms on the part of Grove, are considered below in the context of the cross-claim made by Grove that Cafike

wrongfully terminated the Koonya agreement. For the

reasons I there give, I am of the opinion that Cafike was

entitled to terminate the Koonya agreement in Lay

198 6. However, no doubt because it was recognised that it would be difficult for Cafike to establish anything more than nominal damages in this connection, I was informed during addresses that although Cafike maintained that Grove breached the Koonya agreement by increasing prices in April 1986, nonetheless Cafike was not pressing the

claim for damages or for an account of profits. In other words, the claims made in paras. 6 and 7 of the amended statement of claim were not pressed.

,

45.

(iv) Cafike's claim that Grove passed off its product in

Februarv and March 1987 (paras. 12, 13 and 14 of the amended statement of claim)

and "Applemaid". notional profit to be attributed to the use of the mark "Applemaid" over the period of this passing off

It appears that in the period immediately after the

collapse of the relationship between the parties, Grove marketed apple juice in containers bearing the "Grove Applemaid" label which was not product produced by Cafike.

The passing off is admitted by Grove. The evidence of the

extent of the passing off is sketchy. On 16 March 1987,

Hr. Peterswald saw some of the offending products in

Purity shops in Sandy Bay. It appears that there were in

the order of six dozen or so containers seen by Mr.

Peterswald. It also appears that the passing off occurred over a period of about 19 days because the juice was	seen
by Mr. Peterswald on 18 or 19 March.	An account of
profits is sought.	There is evidence from Mr. Jones, a

chartered-accountant retained by Grove, that its gross profit on the sale of "Grove Applemaid" products in the eight month period from 1 July 1986 to 28 February 1987

was $22,826.00.	This would suggest an average monthly
profit in the order of approximately $2,800.00 gross or

for a period of 18 days, an amount in the order of $1,600.00. In an account of profits for passing off or infringement of trade mark. an attempt must be made to

estimate what profit should be properly attributable to

the use of the name or mark in question. In the present

case, the position is even further complicated by the

circumstance that there are two names involved - "Grove"

is the sum of $400.00.

(V)	Cafike's continuinq claim for passinq off (para.17 of the
amended statement of claim)
Cafike alleges that since March 1987, Grove has continued
to pass off its product. Grove has since that date
adopted the use of new labels for use in connection with
the sale of apple juice. Although there are some
similarities between this label and the earlier label adopted by the parties, it appears to me that they are sufficiently distinguished. In any event, I note that
during addresses this claim was no longer pressed.

(vi) Cafike's claim that Grove wronslv debited an item of

91.149.00 bqainst the account of Cafike in November 1986

jparaa. 11A and 11B of amended statement of claim)

It is now common ground that in August or September 1986,

Cafike would bottle Grove's Mr. Juicy product under an	it was agreed between Mr. Peterswald and Mr. Powell that
arrangement which had as one of its terms an undertaking by Grove to meet the cost of the cartons. In November 1986, Grove debited an amount of $1,449.00 against the account of Cafike for Mr. Juicy cartons. It appears that this was an error. It is true that the error was not
discovered by Cafike for some time but the claim is not
statute-barred by a lapse of time and there is no reason why a mistake of fact of this kind should not now be rectified. In my opinion, the claim for $1,449.00 should be upheld, with interest at the rate of 14% p.a. over a
period of 18 months, i.e. giving an amount of interest of
$JOQ.L9	ar~d d L u L a l cldim in this respect of $1753.29.

(vii) Cafike's claim that Grove failed to account Properlv to

Cafike in respect of promotional deductions allesedlv made

1vara.11 of amended statement of claim)

Cafike contends that in a number of instances, Grove

purported to deduct from monies due by it to Cafike, amounts said to be by way of promotional deductions when part only of the amount should have been deducted. In

short, Cafike's contention is that in several cases a

supermarket outlet charged Grove for the cost of promoting both apple and orange juices. In such a case, Cafike says

Grove should only have debited Cafike with one	quarter of
the cost of	the promotion, being one half of a one half

share of its cost.

The evidence makes good this	claim in	respect	of	the
following invoices:

PURITY	OVERCHARGE
Invoice 3170	$218.50
Invoice 7581	$650.00
Invoice 8150	$417.00
Invoice 9000	$250.00

.

48.

COLES

Invoice 185966	$747.00
Invoice 137560	$150.00
VOSS/STATEWIDE
Invoice 0171	$181.00
Invoice 0632	$181.00
Invoice l181	$181.00
Invoice 3757	$218.00

It is further contended that similar inferences should be drawn in respect of other deductions where no invoice was

discovered. In my opinion, such an inference is not

warranted and I reject this part of the claim.

In the result, I uphold this claim to the extent of

$3,193.50.

Again, it is appropriate that this claim should carry interest. The amounts in question were outstanding over several periods, one as early as January 1985 and some as late as July 1986. I propose to round off this aspect of the claim by allowing interest at the rate of 14% p.a. on the amount claimed over a period of three years, i.e.

giving an amount of interest of $1,341.27 and a total

claim in this respect of $4,534.77.

(viii) Claim by Cafike for uoods sold and delivered to Kokavesis

(para.11 of amended statement of claim)

It is common ground that from time to time Mr. Kokavesis,

who resides in New South Wales, ordered "Grove Applemaid"

product. Because of the exclusive distributorship held by Grove, Mr. Kokavesis dealt with Grove as a principal.

Product was sq-plied and paid for.

,

In January 1987, as the relationship between the present

parties was deteriorating, it appears that Mr. Kokavesis ordered 192 cartons of product. "here is evidence that this order was met by Cafike and consigned by it to Mr. Kokavesis by sea. "here is documentary evidence that the product departed Hobart on 30 January 1987. It appears that Cafike sent no invoice to Grove in respect of this transaction. However, I think that the whole of the surrounding circumstances and, in particular, the previous course of dealings between the parties and Mr. Kokavesis, permit an inference to be d r a m that these goods were ordered by Grove and accordingly Grove is liable for their

price. It	I s common ground that, if Grove is liable, the
amount of its liability is $2,073.00.	I propose to uphold
this claim but not to award interest.

(ix)  cafike's claim that Grove failed to account for amounts

received by Grove in respect of Cooler and Cider (Para.11

of amended Statement of claim)

Cafike contends that Grove is further indebted to it in respect of Grove's failure to account for the proceeds of sale of Cooler and "Scrumpy" Cider. It is common ground that there was a consignment arrangement between the parties in this respect. It is agreed that Grove received from Cafike in February 1987:

(1) 72 cartons of Cooler

( 2 ) 64 cartons of "Scrumpy" Cider

Cafike's case is that Grove is indebted to it in the sum of $1,404.00 in respect of Cooler and in respect of "Scrumpy" Cider in the sum of $691.00. Cafike contends that this product was delivered to Grove who abandoned or dumped the Cooler at the South Hobart tip and that Grove is liable to account to Cafike for its value. The evidence of this claim is not satisfactory. It appears that some at least of the Cooler went off and its dumping would then have been justified. There is also a suggestion in the evidence that some of the product was taken back by Ur. Peterswald. However, Mr. Peterswald denies this.

The evidence on both sides is sketchy. Cafike bears the

onus of proof and I am not satisfied that it has made out

any breach by Grove of the terms upon which the	goods were
bailed to Grove.

B. Grove's cross-claims

(1)    Grove's claim for damases for allesed breach bv Cafike of the Koonva asreement (amended defence and cross-claim paras. 26. 27. 28 and 2 9 1

(a) The terms of the Koonva asreement

As has been said, two of the terms of the agreement

are contentious. I will deal with them separately.
(1) The duration of the asreement

It is common ground that five years was contemplated as the initial term. However, it is contended on behalf of Cafike that no final agreement to a five year term was made because it was intended that the arrangement be documented by the parties' solicitors.

In my opinion, the parties agreed on an initial

five year term at Koonya. There was probably mention of solicitors being involved but once the parties began to implement their arrangement on 1 August, it must be inferred that they

intended to be bound whether or not their
transaction was formally documented. Moreover, both parties then wanted a long-term arrangement. I am satisfied that the parties then agreed on an initial five year term.
The subsequent options to renew the first term
raise more difficult questions. Even on Mr. Powell’s version, it appears that no details of
these options were discussed. But, in any
event, this aspect is now academic. It is accepted by both parties that no enforceable agreement was arrived at in respect of these
options. It would seem that this branch of the
Koonya discussion was severable from the
agreement as to the first term of five years.
In the result, I find that the parties agreed at Koonya on a five year term to commence in June or July 1984.
( 2 )	Price structure Cafike’s case is that the Koonya agreement provided that prices to be charged by either
party could only be varied with the consent of
the other party. Grove accepts this but seeks
to add the qualification mentioned by Mr. Powell in his evidence that failure to agree on a price revision was to be resolved by arbitration. Mr.
and Mrs. Peterswald deny that any reference was
made to arbitration at Koonya.
I have difficulty In accepting Mr. Powell’s
version of the Koonya discussion in this respect. It will be recalled that his evidence was that the price structure then agreed upon could be varied “by mutual discussion or independent arbitration". In hi3 memorandum of 23 February 1987, Mr. Powell stated (at p.2) that Cafike's price and Grove's wholesale price were "set at Cthe Koonya3 meeting. Variations
to be result of primary, market or other
pertinent fluctuations. Inability to agree was
to be decided by independent arbitration".
Even if Mr. Powell mentioned arbitration in the course of the discussion, it seems unlikely that the parties would have committed themselves to this course as a matter of agreement. It was agreed that the marketing arrangement was to last for five years. Both parties had come up with prices that were acceptable to each of them. It is difficult to imagine that either
party would have been prepared to place itself
in the hands of an independent arbitrator on
such a vital matter as price. is It
particularly unlikely when the vagueness of the
proposal is considered. On the whole, I think
it is unlikely that the parties were prepared to
submit to arbitration to break a deadlock over price. I prefer the version given by Mr. and Mrs. Peterswald.
I find that it was an express term of the Koonya agreement that prices to be charged by both
parties were then set and that any variation of
those prices could only occur with the consent
of the other party.

(b) Did Grove breach the Koonva asreement by increasinq

its prices in April 1986?

(1) The discussion in Januarv or Februarv 1986

As has been seen, competing versions of this discussion were given by Mr. Peterswald and Mr. Parell. In my opinion, Mr. Peterswald's account should be accepted as more likely to have occurred. According to Mr. Powell, he then told Mr. Peterswald that Grove would be increasing its prices by 10% to 153 but Hr. Peterswald made no comments about Cafike's prices. This is a

most unlikely situation. As Mr. Powell said in

his memorandum of 23 February 1987, prices of both parties were "set" at Koonya. It is difficult to believe that Mr. Peterswald would stand by and accept no change in his price

whilst Grove increased its price significantly.

At the very least, a discussion of Mr. Peterswald's price would have been provoked. The respective margins to be earned by the parties was a critical consideration to each of them.

It was to the forefront of their earlier

discussions as the terms of the letter of 4 May
demonstrate.

In his memorandum dated 23 February 1987. Mr.

Powell said (at p.2) that -

"In January and February 1986, Mr. Peterswald was advised of the large increases in promotional costs, and the necessity to provide for them to adequately increase our

market share. In March 1986 I advised Mr. Peterswald that I would be increasing the wholesale selling price of all Grove products and implemented during April 1986.. .

In May 1986 Mr. Peterswald challenged the necessity for the implementation of the aforesaid increase and was advised of our initial agreement to preserve respective margins. Mr. Peterswald stated that he believed that our price increase would disadvantage sales, which has not been the

case. . . "

This is a curious version of the events. Why would Hr. Peterswald wait until May to protest about a price increase said to be notified in March?

I accept Mr. Peterswald's version of the

discussion in January and February and reject

Mr. Powell's account as unreliable.

It is true that, on Mr. Peterswald's version,

Mr. Powell foreshadowed the possibility of a future increase in Grove's prices. But the discussion was general and tentative. It is not possible to spell out of it an agreement by Cafike that Grove was to be at liberty to

increase its price of "Applemaid" by any

particular amount. The conversation proceeded

.

56.

upon the footing that any increase was to be the

Subject of further discussions, and, no doubt,

bargaining between the parties.

The Grove price rise

It is common ground that Grove increased its

price in March, effective April by up to 15%.

The discussion in April 1986 was better than Mr. Powell's.

I accept Mr. Peterswald's version. I find that Mr. Powell then failed to disclose that he had increased his prices and, instead, sought to blame the supermarkets.

The first discussion in Mav 1986

Again, Mr. Peterswald's account of this meeting

was P U L ~ convincing than that offered by Mr.

Pwell. Hr. Peterswald's notes also support his

account. I find that Mr. and Mrs. Peterswald

then accused Mr. Powell of breaching their agreement and that Mr. Powell then accepted the

three options put by Mr. Peterswald.

Breach by Grove

It must follow, in my opinion, that in April

1986, Grove breached the Xoonya agreement by

increasing its price without informing Cafike of

. .

57.

its intention to do so. In my view, this was a breach of an important, indeed fundamental, term of the marketing arrangement. As has been said, the pricing structure was of central significance to the parties. Without proper performance of this aspect of their contract, their relationship could not continue.

(c) Termination bv Cafike

Given the serious breach involved, Cafike was entitled in May 1986 to terminate the Xoonya agreement. In my view, the first discussion between the parties in May, as described by Mr. Peterswald,

was consistent only with the exercise by Cafike, and

the acceptance by Grove, of that right. In substance and in form, Mr. Peterswald then put to Mr. Powell, and Mr. Powell accepted, that their existing relationship had ended. Mr. Powell did not wish to

revert to the "original margins", which was the first

option. The remaining possibilities were (the second

option) a "joint venture" or (the third option) a

parting of the ways. This meant that the parties

accepted that the original agreement had gone.

It is true that, thereafter, Cafike continued to

supply product to Grove but this was done in

accordance with the on-going discussions between the parties which continued for many months. The product supplied after the first discussion in May 1986 was

sold under the umbrella of and, in the context of, those and the later discussions. These goods were

not sold under the original Koonya	agreement.	For
one thing,	in August, Grove agreed, on an	interim

basis, to a price structure which was quite different

to the Koonya arrangement.

As events happened, the "joint venture" negotiations were not fruitful. This meant that Mr. Peterswald's third option came into operation and each party was

then free to go its own way.

It is true that in the negotiations in July 1986, Mr.

Powell asserted that Grove had subsisting rights

under the Koonya arrangement. But this assertion,

late as it was, has to be seen against the background of the May discussion when Mr. Powell accepted that Grove was in breach of the Koonya agreement.

To summarise the foregoing in point of legal

analysis: (1) in April 1986, Grove committed a

fundamental breach of the Koonya agreement. ( 2 ) In

May 1986, Cafike exercised its right to terminate the

agreement. ( 3 ) In May 1986 the parties agreed to negotiate for a "joint venture" on the footing that, if the negotiations proved unsuccessful, the parties

could go their	m ways.	( 4 )	f.n	August 1986, an
interim price	structure	was	adopted pending	the

outcome of the "joint venture" negotiations. ( 5 ) In

February 1987, those negotiations failed. (6) At

that stage, each party was free of any	future
commitment to the other.
In the result, this cross-claim fails.

(ii)  Grove's claim for debt for accountins services rendered

Ismended defence and cross-claim paras. 36. 36A. 36B and

37)

As has been noted, Grove rendered certain accountancy and

similar services to Cafike between September 1986 and
February 1987. Grove puts its case in several ways:

(1) Cafike is liable to pay a proportion of the management fee of $15,000.00 per annum being an

amount discussed in the "joint venture" negotiations

in August 1986.

In my opinion, this claim should be rejected. For

one thing, it appears that the fee of $15,000.00 was to be payable in respect of services of a managerial kind extending beyond accounting or similar services; secondly, the management fee was part of the "joint

vmture" MangemeDts &en and if they.- pt in place. I

ern not satisfied that Cafike expressly or by

implication agreed to pay for the accounting and similar work done by Mr. Pastoor and his clerical

staff at the rate of $15.000.00 per annum.

. .

. z " 6 0 .

( 2 ) Alternatively, Grove claims that if no fee for the services was actually agreed, Cafike is liable to pay a reasonable amount on a quantum meruit or "unjust enrichment" basis.

Cafike disputes any liability to pay for these services. It contends that Grove elected to have access to its books and records for the private purpose of satisfying itself in respect of Cafike's financial position.

In my view, this defence should be rejected on the facts. It is true that one of the purposes of handing the books to Mr. Pastoor was to assist Grove in its "joint venture" negotiations. But it was further contemplated Mr. Pastoor would write up the books in the interim. This was done and a corresponding benefit was conferred upon Cafike at its implied, if not express, request. In those

circumstances, there should be imposed upon Cafike a

liability to pay a reasonable amount for what was

done. In support of this claim, Grove contends for

the following:

Office Mansqer (Mr. Pastoor)

September 1986 to February 1987

5 months at average of 8 hours per month = 40 hours

Annual salary $25,000.00 = 12.65 per hour

( 3 8 hour week)

Plus "on costs" at 25% = 15.81 X 40 hours = $623.00

. , -

.I 61.

Clerical

September 1986 to February 1987

5 months at average of 10 hours per

month = 50 hours

Average salary of $4,500.00 = $7.33

(38 hour week)

Plus "on costs" of 250 = 9.16 = $458.12

SlOBl.12

In my opinion, these figures are reasonable. I

uphold this claim together with interest in the sum of $239.65 being a rounded off period of 19 months at

14% p.a.

(iii) Grove's claim that Cafike passed off its product (Amended

defence and cross-claim paras. 30, 31. 32.	33 and 34)
These claims were not pressed.

(iv)   Grove's claim that Cafike is indebted to it in respect of

the cost of labels (Amended defence -and cross-claim
para. 14)
This claim was not pressed.

SUMMARY OF THE RESULT OF THE PROCEEDINGS
A.	Cafike's claims
(i) I uphold the claim for the price of goods sold and

delivered in January and February 1987 in the sums of $18.233.00 for January together with interest in the

S- of $3,356.87, and $20,977.73 for February

together with interest in the sum of $3,636.91.

(11) I reject the claim for 475 cartons of product

delivered and not accounted for.

(iii) I reject the claim for damages for breach of contract

or for breach of fiduciary duties under an alleged
joint venture arrangement.

(iv) I uphold the claim that Grove passed off Cafike's

product in February and March 1987 in the sum of
$400.00.

(v) I reject the continuing claim for passing off.

(vi) I uphold the claim that Grove wrongly debited an item

of $1,449.00 against the account of Cafike in November 1986 in the sum of $1,449.00 together with interest in the sum of $304.29.

tvii) I uphold the claim that Grove failed to account properly to Cafike in respect of promotional deductions in the sum of $3,193.50 together with interest in the sum of $1,341.27.

( v i i i ) I uphold the claim for goods sold and delivered to

Mr. Kokavesis in the sum of $2,073.00 .

(ix) I reject the claim that Grove failed to account for

amounts received by them in respect of Cooler and

Cider.

B.	Grove's cross-claims
(i) Grove's claim for damages for alleged breach by

Cafike of the Koonya agreement is rejected.

(ii) Grove's claim for debt for accounting services

rendered is upheld in the sum of $1,081.12 together
with interest in the sum of $239.65.

(iii) Grove's other cross-claims were not pressed.

costs three-quarters of its costs of the proceedings.

I certify that this and the

preceding SlxTcJ -M e ‘5.5 (63)

pages are a true copy of the

Reasons for Judgment herein of

Mr. Justice Beaumont.

Counsel for Cafike Pty.	Mr. W. Ayliffe
Ltd. :	Mr. R. Curtis
Solicitors for Cafike Pty.
Ltd. :	Abetz Curtis h Dutton
Counsel for R.R. & S.M.	Mr. C. Brown
Powell Pty. Ltd.:	Mr. L. Sealy
Solicitors for R.R. & S.M.
Powell Pty. Ltd.:	Piggott, Wood & Baker
Dates of Hearing:	18, 19, 20, 21, 22, 27, 28, 29 April, 24 May 1988
Date Judgment Delivered:	25 May 1988