‘Krosno’ S.A.

Case [2005] FCAFC 97

FEDERAL COURT OF AUSTRALIA

H.A.G. Import Corpn (Australia) Pty Ltd v Krosnienskie Huty Szkla

‘Krosno’ S.A. [2005] FCAFC 97

APPEAL – discharge of order setting aside service outside the Commonwealth – whether primary judge erred in deciding no prima facie case for relief against respondent

APPEAL – summary judgment – whether primary judge erred in deciding case against respondent could not possibly succeed

CONTRACT – novation – contract between distributor and importer of glassware – whether prima facie evidence that contract novated – whether prima facie evidence that respondent breached novated agreement

TRADE PRACTICES – misleading and deceptive conduct – whether prima facie evidence that representations made – whether finding that representations made would lead to relief sought – whether primary judge erred in finding that, even if made, no damage could be suffered as a result

Trade Practices Act 1974 (Cth) ss 52, 82

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 applied
Costa Vraca Pty Ltd v Bell Regal Pty Ltd [2003] FCAFC 305 cited
Decor Corp Pty Ltd v Dart Industries Inc (1991) 104 ALR 621 applied
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 cited
Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444 cited
Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2005] FCA 288 applied
Paramasivam v Flynn (1998) 90 FCR 489 cited

N Seddon and M Ellinghaus, Cheshire and Fifoot’s Law of Contract, 8th Australian ed, Butterworths, Sydney, 2002

H.A.G. IMPORT CORPN (AUSTRALIA) PTY LTD v KROSNIENSKIE HUTY SZKLA ‘KROSNO’ S.A. and HOUSEWARES INTERNATIONAL LIMITED

VID 1221 of 2004

H.A.G. IMPORT CORPN (AUSTRALIA) PTY LTD v HOUSEWARES INTERNATIONAL LIMITED

VID 1247 of 2004

BRANSON, MARSHALL AND HELY JJ
1 JUNE 2005
MELBOURNE


IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

VID 1221 of 2004

BETWEEN:

H.A.G. IMPORT CORPN (AUSTRALIA) PTY LTD
APPLICANT

AND:

KROSNIENSKIE HUTY SZKLA 'KROSNO' S.A.
FIRST RESPONDENT

HOUSEWARES INTERNATIONAL LIMITED
SECOND RESPONDENT

JUDGES:

BRANSON, MARSHALL AND HELY JJ

DATE OF ORDER:

1 JUNE 2005

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT:

1.Leave be granted to the applicant to appeal from order 1 and, insofar as it relates to the costs of the first respondent, order 3 of the orders made by the primary judge on 17 September 2004.

2.The appeal pursuant to the leave granted by order 1 hereof be dismissed.

3.The applicant pay the first respondent’s costs of the application and appeal.

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


IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

VID 1247 of 2004

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

H.A.G. IMPORT CORPN (AUSTRALIA) PTY LTD
APPELLANT

AND:

HOUSEWARES INTERNATIONAL LIMITED
RESPONDENT

JUDGES:

BRANSON, MARSHALL AND HELY JJ

DATE OF ORDER:

1 JUNE 2005

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT:

1.The appeal be allowed.

2.Order 2 and, insofar as it relates to the…

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Details
AGLC
‘Krosno’ S.A. [2005] FCAFC 97
Case
[2005] FCAFC 97
Decision Date

CaseChat Overview and Summary

The case of ‘Krosno’ S.A. involves a dispute between Krosno S.A. and H.A.G. concerning an alleged exclusive distribution agreement for household glassware with the ‘Krosno’ brand name in Australia. The matter was heard in the Federal Court of Australia. The primary issue before the court was whether the alleged exclusive distribution agreement between Minex and H.A.G. was novated to include Krosno, thereby making Krosno liable to H.A.G. for breach of that agreement.

The court was required to determine whether the evidence presented by H.A.G. was sufficient to establish a prima facie case against Krosno for breach of the exclusive distribution agreement. The court considered the evidence provided by both parties and the arguments presented regarding the existence of the agreement, the awareness of Krosno about the agreement, and the possibility of novation. The court also examined the relevant legal principles concerning novation and the requirements for establishing a prima facie case.

The court found that H.A.G. had not established a prima facie case against Krosno. The primary judge concluded that there was no evidence of an agreement between Krosno, Minex, and H.A.G. that would result in novation of the original agreement. Furthermore, the court found that Krosno was not aware of the 1986 Agreement until well after it was allegedly novated, and Minex continued to treat the 1986 Agreement as being in effect. The court also noted that Krosno's direct dealings with H.A.G. did not necessarily imply a novation of the original agreement. As a result, the court dismissed H.A.G.'s application for leave to amend the Statement of Claim and for further and better discovery from Housewares.

The final orders of the court were to grant leave to the applicant to appeal from certain orders made by the primary judge, to dismiss the appeal, and to order the applicant to pay the first respondent's costs of the application and appeal.

Orders

Orders of the court

1. Leave be granted to the applicant to appeal from order 1 and, insofar as it relates to the costs of the first respondent, order 3 of the orders made by the primary judge on 17 September 2004.

2. The appeal pursuant to the leave granted by order 1 hereof be dismissed.

3. The applicant pay the first respondent’s costs of the application and appeal.

Background

Background to the litigation

We draw attention to our decision to reproduce quoted material in these reasons for judgment exactly and without drawing attention to errors by the insertion of the word ‘sic’ in brackets. Unsurprisingly in a case concerning communications between Poland and Australia the number of errors is too great for the usual practice to be attractive.background facts There is only limited dispute between the parties as to the primary facts that provide the background to the litigation between them. What is principally in dispute is the inferences to be drawn from those facts. On 5 September 1986 in Poland an agreement in writing was entered into between an entity, described in the written agreement as ‘Export-Import Enterprise MINEX’, but agreed to be Minex Centrala Eksportowo‑Importowa S.A. (‘Minex’), and H.A.G. By that agreement Minex granted H.A.G. the exclusive right of purchase of household glassware with the ‘Krosno’ brandname for distribution within Australia. Minex agreed not to sell glassware with the Krosno label to any Australian importer but H.A.G. from 1 January 1987. The agreement was by its terms ‘concluded for an indefinites period of time’ with each party having ‘the right to denounce it giving six months notice by registered letter’. As at the date of the above agreement (‘the 1986 Agreement’) Krosno did not sell any of its products directly to customers but rather supplied its products to Minex, which acted as its distributor. The evidence discloses a dispute between Krosno and H.A.G. as to whether Krosno was aware in December 2000 of the 1986 Agreement. A member of the firm of solicitors acting for Krosno in respect of this litigation swore an affidavit on 17 February 2004 in which he deposed to having been informed by Artur Janowski, Commercial Director, Krosno that Krosno had no knowledge of the 1986 Agreement prior to March 2003. No details of the basis of Mr Janowski’s knowledge in this regard are given. Nor does the affidavit disclose whether Mr Janowski had any involvement with Krosno, and if so what involvement, in 1986. Max Grundmann (‘Mr Grundmann’), a director and it seems the guiding mind of H.A.G., by an affidavit dated 22 March 2004, gave evidence as follows:‘I deny that Krosno did not know of the Krosno Agreement [ie the 1986 Agreement] prior to March 2003. In 1984 HAG requested that Minex and Krosno grant it exclusivity to Krosno branded products in Australia. This request was refused. Minex and Krosno wanted to continue with two distributors in Australia being HAG and KWL. HAG ceased to sell Krosno products in Australia as a result. At this time HAG was largest distributor in Australia of the products. Some six months later Minex and Krosno jointly approached HAG seeking to negotiate an exclusive distribution agreement for Australia with HAG. The negotiations lead to the signing of the Krosno Agreement. Both representatives from Minex and Krosno were involved in the negotiations of this agreement.’

Evidence

Evidence Before The Court

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Decision

Reasons for decision

BRANSON, MARSHALL AND HELY JJ
H.A.G. sought orders for leave to further amend the Statement of Claim and for further and better discovery from Housewares.reasons for judgment of the primary judgeKrosno’s Motion Heerey J observed that on Krosno’s motion to discharge the order granting leave to serve originating process outside the Commonwealth H.A.G. bore the onus of persuading the Court that it had a prima facie case for relief against Krosno. His Honour reminded himself that it was necessary to keep in mind that H.A.G. had not at that stage had the advantage of discovery, subpoena and other procedural aids to the making out of a prima facie case. His Honour was not satisfied that H.A.G. had made out a prima facie case that the Krosno Agreement had come into existence by novation. His Honour concluded that:‘the uncontested evidence is that, so far from HAG and Minex agreeing to discharge the old contract in consideration of Krosno entering into a new one, Krosno was not aware of the 1986 Agreement. Moreover, well after the alleged novation, Minex treated the 1986 Agreement as still being on foot by giving notice of termination. The fact that for some time after March 2000 Krosno dealt directly with HAG and treated it as its exclusive Australian distributor, of itself does not establish a novation of the 1986 Agreement made between HAG and Minex some 14 years earlier. The 1986 Agreement is not mentioned in any of the documents relied on as evidence of the novation. True it is, novation may arise from the conduct of the parties: Harry v Fidelity Nominees Pty Ltd (1985) 41 SASR 458 at 461, although ordinarily novation is not to be inferred from conduct without some distinct request: Chitty on Contracts (29th edition) at 1201. But the fact remains that novation is the substitution of a new contract for an old by the agreement of all parties to the old and the new: Tito v Wadell (No 2) [1977] 1 Ch 106 at 287. An animus contrahendi is required: Tito, ibid. Supply of product direct from Krosno to HAG, and Krosno treating HAG as exclusive Australian distributor, without any further express definition of rights or obligations, and without any reference to the supposedly novated 1986 Agreement, are circumstances consistent merely with that being a course of dealing that would continue only as long as it proved mutually satisfactory. This lack of contractual obligation on either side cut both ways. HAG might not have had any right to continuing exclusivity, but equally it did not have any obligations such as minimum orders or stipulated expenditure on promotion.’ His Honour’s finding that there was no prima facie case of novation led to a conclusion that, subject to the proposed further amendment of the Statement of Claim, H.A.G. had not established a prima facie case against Krosno based on the Krosno Agreement. Additional obstacles in the way of H.A.G. establishing a prima facie case against Krosno were also identified by his Honour. Those obstacles were that there is no right to damages in respect of an anticipatory breach of contract that is not accepted, that H.A.G. could not suffer loss or damage from the mere placing of orders with Krosno for the supply of Krosno glassware (as opposed to from the actual supply of the glassware) and that the case for H.A.G. overlooked the provision in the Krosno Agreement, which Krosno had invoked, allowing its termination on six months’ notice.

Ratio Decidendi

Legal Principle Established

Established by: BRANSON, MARSHALL AND HELY JJ

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