Opti-Pharm Pty Ltd v Nature One Dairy Pty Ltd
[2018] VSC 397
•20 JULY 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
| AT MELBOURNE COMMERCIAL COURT |
S ECI 2015 00459
| OPTI-PHARM PTY LTD (ACN 110 511 629) | Plaintiff |
| v | |
| NATURE ONE DAIRY PTY LTD (ACN 602 371 684) | Defendant |
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JUDGE: | ELLIOTT J |
WHERE HELD: | MELBOURNE |
DATE OF HEARING: | 6 JULY 2018 |
DATE OF RULING: | 20 JULY 2018 |
CASE MAY BE CITED AS: | OPTI-PHARM PTY LTD V NATURE ONE DAIRY PTY LTD |
MEDIUM NEUTRAL CITATION: | [2018] VSC 397 |
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SUMMARY JUDGMENT – Where alleged breach of contract does not correspond to a pleaded obligation – Loss of commercial opportunity – Whether loss can be established – Whether damages could only be nominal – Consideration of counterfactuals properly a matter for trial – Civil Procedure Act 2010 (Vic) ss 62, 63 – Whether claim has a real prospect of success – Application dismissed.
PRACTICE AND PROCEDURE – Application to amend pleadings – Rectification claim sought to be raised – Whether the amended pleading discloses a real prospect of success – Supreme Court (General Civil Procedure) Rules 2015 (Vic) r 36.01(1)(a) – Leave granted.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S Horgan QC Mr T Clarke | KCL Law |
| For the Defendant | Mr P Noonan | Jasper Lawyers |
HIS HONOUR:
A. Introduction
This proceeding concerns an agreement (“the Agreement”) by which the defendant, Nature One Dairy Pty Ltd (“Nature One”), agreed to supply infant milk formula (“the Product”) to the plaintiff, Opti‑Pharm Pty Ltd (“Opti-Pharm”) for an initial term of 1 year (“the Term”).
Pursuant to the Agreement, Nature One undertook to use its best endeavours to obtain registration in respect of infant milk formula intended to be sold by Opti‑Pharm in China (“the Registration Obligation”). Opti-Pharm alleges that Nature One repudiated the Agreement by breaching the Registration Obligation, and that Opti-Pharm was accordingly entitled to terminate the Agreement, which, it alleges, it lawfully did.
By summons filed 22 June 2018, Nature One seeks summary judgment pursuant to ss 62 and 63 of the Civil Procedure Act 2010 (Vic), on the basis that Opti-Pharm’s claims in the statement of claim filed on 4 December 2017 (“the Statement of Claim”) have no real prospect of success (“the Summary Judgment Application”). Alternatively, Nature One seeks that the Statement of Claim be struck out pursuant to r 23.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) on the basis it does not disclose a cause of action, may prejudice, embarrass or delay the fair trial of the proceeding or that it constitutes an abuse of process.
By summons filed 4 July 2018, Opti-Pharm seeks leave to amend the Statement of Claim so as to clarify its contended construction of the Registration Obligation, and to include an alternate claim for rectification on the basis that the Registration Obligation does not reflect the common intention of the parties by reason of a common mistake (“the Amendment Application”). In making the Amendment Application, Opti-Pharm effectively conceded that the Statement of Claim was liable to be struck out in its original form.
Nature One pressed the Summary Judgment Application in modified form, in light of the Amendment Application.
For the reasons set out below, leave will be granted to Opti-Pharm to amend its Statement of Claim, and the Summary Judgment Application will be dismissed.
B. Background
B.1 Terms of the Agreement
The Agreement is in writing and was executed by the parties on 17 December 2015.[1] It provides, relevantly:
[1]The agreement was executed by Opti-Pharm and by “D&H Pacific Pty Ltd [trading as] Nature One Dairy”, which was Nature One’s former name.
1 Definitions and Interpretation
1.1 Definitions
In this Agreement, the following definitions apply unless the context requires otherwise: …
“CNCA” means Certification and Accreditation Administration of the People’s Republic of China (“the Accreditation Administration”); …
“Commencement Date” means the date of this Agreement (being the date that all parties have executed the Agreement); …
“Minimum Order Requirement” means the amount of Product specified in Item 2 of Schedule 1;[2] …
[2]Item 2 of Schedule 1, which was amended by hand and appears to be initialled on behalf of both parties, provided that the Minimum Order Requirement was “250,000 PA 62500 PER QTR”.
“Processing” means the processes associated with canning or blending and canning including the sampling and testing of the Product in accordance with the Testing Procedures and “Process” and “Processed” have equivalent meanings;
“Product” means the nutritional milk powder infant formula product that complies with the Specifications;
“Quarter” means consecutive periods of three Months, and Q1, Q2, Q3, and Q4, mean the first, second, third and fourth Quarters which consecutively comprise a period of 12 consecutive Months;
“Services” means the Processing and supply of the Product; …
“Term” means the period of twelve (12) Months commencing on the Commencement Date;
…
1.2 Interpretation
…
(c) Headings, capital letters, underlining, layout and numbering are for convenience only;
…
2 Term of Agreement
2.1 Term
This Agreement is for a term of one year, to be extended for one further year (“the Term Extension”) upon [Opti-Pharm] giving formal notice that it requires the Term Extension providing the following conditions are satisfied:
(a) The Term Extension Request is made during Q3 of the Term;
(b) Minimum quantities ordered during the Term are in accordance with the Minimum Order Requirement;
(c) The Customer is not in breach of this agreement at the date the Term Extension Request is made.
(d) The parties reach agreement is reached (sic) for any variation to this Agreement necessary for the Term Extension in respect of the Price and in respect of the Minimum Order Requirement.
2.2 Continuance after Term
If the parties continue to perform their respective obligations during the Term Extension, then unless the parties otherwise agree in writing, this Agreement will continue to apply until terminated by either party by prior written notice of not less than 30 days.
…
3 Provision of Services and Supply of the Product
3.1 Provision of Services
[Nature One] will provide the Services to [Opti-Pharm] in accordance with the terms of this Agreement as from the Commencement Date.
3.2 Supply of the Product
During the Term, [Opti-Pharm] agrees to purchase from [Nature One] all of its requirements for products of the same kind and nature as the Product, except with the prior written consent of [Nature One]. [Nature One] agrees to supply the Product in accordance with the Terms of this Agreement as from the Commencement Date.
…
12.5 Intellectual Property Rights
(a) The parties acknowledge and agree that for duration of the Term, for the purposes of registration with the [the Accreditation Administration] of the brand used by [Opti-Pharm] in connection with the Product supplied to [Opti-Pharm] by [Nature One] (“Brand”), all Intellectual Property Rights in such Product (including without limitation Intellectual Property Rights in relation to the Brand name, labelling and packaging) will vest with [Nature One]. [Nature One] and/or its agents will use their best endeavours to register the Brand with [the Accreditation Administration] and [Opti-Pharm] agrees to do all things necessary to facilitate such registration at the direction of [Nature One].
B.2 The Term of the Agreement
By the Statement of Claim, Opti-Pharm contends that the Agreement did not terminate at the conclusion of the Term, but that it was extended for “the further term” to 16 December 2017, which was the Term Extension. The continuation of the Agreement for the Term Extension is said to be implied by the subsequent conduct of the parties in “continuing to perform their respective obligations throughout 2017”, including by Opti-Pharm “ordering products” and by Nature One taking steps to comply with the Registration Obligation contained in clause 12.5 of the Agreement.
It was common ground that Opti-Pharm paid a $100,000 deposit to Nature One on 23 June 2017 (“the Deposit”), but was not relevantly supplied by Nature One during the Term Extension.
Nature One denies that the Agreement continued on foot as alleged, and contends that it was terminated at the conclusion of the Term on the basis that the relevant conditions for the Term Extension, as set out in clause 2.1 of the Agreement,[3] were not met. In particular, Nature One alleges that Opti-Pharm failed to meet the Minimum Order Requirement during the Term.
[3]See par 7 above.
Alternatively, Nature One argues that the Agreement came to an end at the conclusion of the Term Extension on the basis that Opti-Pharm failed to perform its obligations with respect to the Minimum Order Requirement during the Term Extension.
Ultimately, for the purposes only of the Summary Judgment Application, Nature One accepted that it was arguable that the Agreement remained on foot for the duration of the Term Extension.[4]
[4]This was accepted for this limited purpose on the basis that any questions of waiver or estoppel in respect of compliance with the Minimum Order Requirement were properly matters for trial.
B.3 Alleged repudiation of the Agreement
In its Statement of Claim, Opti-Pharm alleges that, on or around 14 July 2017, Nature One obtained registration in China of Opti-Pharm’s trade marks in certain classes in its own name, without the knowledge or permission of Opti-Pharm (“the Trade Marks”). No breach of the Agreement is pleaded by reason of Nature One obtaining registration of the Trade Marks.
Opti-Pharm further alleges that, on 2 October 2017, Nature One informed it that the Opti-Gold brand of infant milk formula (“the Brand”) would not be registered for sale in China “as it did not have a history of sale in the Chinese market”. It is alleged Nature One subsequently informed Opti-Pharm that an available “registration slot” would only be provided to Opti-Pharm if Opti-Pharm agreed that Nature One would be granted partial ownership of the Brand.
Opti-Pharm claims that this conduct constituted a breach by Nature One of the Registration Obligation, which amounted to a repudiation and entitled Opti-Pharm to terminate the Agreement. Opti‑Pharm purported to terminate the Agreement on 10 November 2017 and requested the reassignment of the Trade Marks.[5]
[5]The defence filed by Nature One on 5 February 2018 contended that the Trade Marks were registered pursuant to a request by Opti-Pharm coupled with an undertaking to reimburse Nature One for the costs of registration. At the hearing, counsel for Nature One indicated that the Trade Marks would be transferred if Opti-Pharm paid registrations costs of approximately $5000.
Opti-Pharm commenced this proceeding on 4 December 2017, seeking:
(1) A declaration that Nature One is obliged to do all things and sign all documents necessary in order to assign or transfer the Trade Marks to Opti-Pharm.
(2) An injunction requiring Nature One to do all things and sign all documents necessary in order to assign or transfer the Trade Marks to Opti-Pharm.
(3) $100,000, being the amount of the Deposit paid on 23 June 2017.
(4) Damages.
B.4 The Summary Judgment Application as originally made
The Summary Judgment Application was supported by an affidavit affirmed by Nature One’s solicitor, and a further affidavit sworn by Nature One’s director which simply adopted the contents of the first affidavit. Both affidavits were filed prior to the Amendment Application being made.
The Summary Judgment Application, as originally made, contended that the conduct constituting the breach relied upon by Opti-Pharm in the Statement of Claim was not conduct in respect of the registration of the Brand as required by the Registration Obligation, but rather related to a new regulatory requirement imposed by the Chinese government falling outside the Registration Obligation.
It was common ground that the Registration Obligation required Nature One to register the Brand with the Accreditation Administration.
The evidence before the court indicates a further regulatory requirement was introduced in China with respect to the sale of infant milk formula products with effect from 1 January 2018, requiring registration of the Product with a separate agency called the China Food and Drug Administration (“the Food and Drug Administration”).[6] It appears from the evidence that registration with the Accreditation Administration is a regulatory prerequisite to registration with the Food and Drug Administration. This regulatory change was announced on 6 June 2016 (that is, after the execution of the Agreement).
[6]China Food and Drug Administration Decree No 26, Administrative Measures for Registration of Infant and Young Children Milk Powder Formula Recipes.
Opti-Pharm contended that the references to registration of “the Brand with [the Accreditation Administration]” are to be broadly construed as requiring Nature One to obtain all Chinese regulatory registrations necessary to permit the retail sale of the Brand in China. It contended that any narrow construction would mean the Registration Obligation would be of no commercial utility. On this basis, Opti–Pharm contends that the Registration Obligation encompasses registration of the Product.
Nature One argues for a narrower construction of the Registration Obligation. It contends that the Registration Obligation was limited to registration of the Brand with the Accreditation Administration, and that accordingly it was not obliged to register the Product with the Food and Drug Administration.
It was common ground that Nature One obtained registration with the Accreditation Administration for its manufacturing facility on or around 1 October 2017. However, Nature One claims that registration of the Product with the Food and Drug Administration is yet to occur.
B.5 The Amendment Application
Opti-Pharm now seeks leave to amend the Statement of Claim in 2 primary respects. First, it seeks to introduce a new paragraph 4A, which provides:
On the proper construction of clause 12.5(a) [of the Agreement], each reference to registration of the Brand “with [the Accreditation Administration]” is to be interpreted as referring to the obtaining of all Chinese regulatory registrations necessary to permit the Product to be sold in the Chinese retail market.
Secondly, Opti-Pharm seeks to include an alternate claim for rectification of the Agreement, such that the Registration Obligation required Nature One or its agents to “use their best endeavours to obtain all Chinese regulatory registrations to permit retail sale in China of the Brand”.
The Amendment Application was supported by affidavits of Opti-Pharm’s solicitor acting in this proceeding, its managing director and a third person, Simon Hansford, who has experience in the dairy and milk powder products manufacturing and export industries and was involved in the negotiation of the Agreement between the parties.
Those affidavits explain that, following the articulation by Nature One of its interpretation of the Registration Obligation and the making of the Summary Judgment Application, Opti-Pharm had revisited the negotiations and communications between the parties leading up to the execution of the Agreement. On the basis of those negotiations and communications, Opti-Pharm contends Nature One’s construction of the Registration Obligation is incorrect, and proposes amendments in order to “clarify its position in relation to the true meaning and effect of [the Registration Obligation]”.
B.6 The Summary Judgment Application as ultimately pressed
By reason of the Amendment Application, Nature One adapted the Summary Judgment Application. In written submissions filed the day before the hearing of the 2 summonses, Nature One explained:
The issue is now whether the proceeding should continue, by reference to:
(a) whether the proposed amendment adequately addresses the defects in [Opti-Pharm]’s claim, so as to identify a claim with a real prospect of success; and
(b) whether the proposed amendment is otherwise of sufficient clarity to be permit[ted] to be filed.
Nature One’s contentions in this respect were put on the basis that, even if each allegation in the amended pleading were successful, Opti-Pharm would be unable to demonstrate any loss or damage above a nominal amount, and accordingly its loss and damage claim has no real prospect of success. Further, Nature One contended the loss and damage claimed by Opti-Pharm was not sufficiently clearly articulated.
B.6.1 Alleged inability to make out loss and damages claim
In particular, Nature One relied on 2 grounds.
First, it contended that registration with the Food and Drug Administration would not have been obtained prior to the Agreement coming to an end. In this regard, Nature One relied on an expert report of Chen Yonghao filed by Opti-Pharm on 15 June 2018 (“the Report”). The Report states that the minimum time required to obtain registration with the Food and Drug Administration is 88 working days. On the assumption that the Accreditation Administration registration obtained on or around 1 October 2017[7] was a prerequisite to registration with the Food and Drug Administration, the earliest date by which Nature One could obtain Food and Drug Administration registration was in or around February 2018. Nature One contended that the Agreement would have come to an end prior to February 2018, either because the conditions for the Term Extension were not met or because Nature One would have terminated the Agreement by giving 30 days’ notice after 17 December 2017 pursuant to clause 2.2 of the Agreement (“the Termination Clause”).[8] Accordingly, Nature One argued that it would not have been under any continuing obligation to obtain Food and Drug Administration registration or to allocate any available product slot to Opti-Pharm.[9]
[7]See par 23 above.
[8]See par 7 above.
[9]See par 37 below.
Secondly, Nature One argued that, even if it obtained Food and Drug registration in 2018, Opti-Pharm could not have taken advantage of any commercial opportunity that may have resulted.[10] Nature One contended that Opti-Pharm had no ability to export the Product to China, in 2018 or thereafter, because it would not have had a relevant source of infant formula. Nature One asserted that it would have terminated the Agreement on the basis that Opti-Pharm had failed to meet the Minimum Order Requirement during the Extension Term and would have refused to further supply Opti-Pharm in any event. Further, it stated that any Food and Drug Administration registration ultimately obtained would be attached to Nature One and would only entitle Opti-Pharm to import infant milk formula supplied by Nature One. Nature One therefore claimed there was no real chance of the Agreement continuing to govern an ongoing commercial relationship between the parties.[11]
[10]Reliance was placed on Masters Home Improvement Pty Ltd v North East Solution Pty Ltd [2017] VSCA 88, [411] (Santamaria, Ferguson and Kaye JJ).
[11]Reliance was placed on Asia Television Ltd v Yau’s Entertainment Pty Ltd [2003] FCA 720, [22] (Gyles J).
In response, Opti-Pharm contended that the adjudication of counterfactual possibilities had Nature One not repudiated the Agreement, including whether Nature One would have terminated the Agreement, or whether the parties would have had a commercial basis to continue to work together pursuant to the Agreement, are matters to be determined at trial.
In particular, Opti-Pharm disagreed with the contention put by Nature One that Nature One would have had a right, from 17 December 2017, to terminate the Agreement pursuant to the Termination Clause.[12] A question therefore arose at the hearing as to the correct interpretation of the Termination Clause.[13]
[12]See also par 37 below.
[13]See par 7 above.
Nature One contended that either party had a right under the Termination Clause to terminate the Agreement during the Term Extension by giving 30 days’ notice. In this regard, it referred to the fact that the relevant heading for the Termination Clause was worded “Continuance after Term” rather than referring to the continuation of the Agreement after the Term Extension. This submission appeared to ignore an express term of the Agreement.[14] In contrast, Opti-Pharm submitted the right to terminate on 30 days’ notice only applied after the end of the Term Extension.
[14]Cf cl 1.2(c) of the Agreement: see par 7 above.
Finally, Opti-Pharm also pointed to the fact that Nature One has already allocated at least 2 of its 3 product series slots to other companies, namely Sinopharm and Nuchev. There may be a question as to whether Nature One finally prevented itself from facilitating, or perhaps fettered its ability to facilitate, the sale of the Brand in China, contrary to the Registration Obligation as contended for by Opti-Pharm.
Accordingly, Opti-Pharm contended that, although it is not yet apparent whether the loss claimed by Opti-Pharm will ultimately be established, there was a real prospect of successfully claiming damages for the lost opportunity caused by Nature One’s repudiation.[15] In that regard, Opti-Pharm submitted that the likelihood of Nature One terminating the Agreement was a question of fact as to what might have occurred, and not simply a question to be determined by what rights Nature One had either on 1 October 2017 or after the expiration of the Term Extension. Further, Opti-Pharm submitted this issue went to the question of the value of any lost opportunity (which is to be determined by reference to the prospects of success of the relevant commercial opportunity)[16] and not to whether any loss of opportunity had been occasioned by the alleged breach of the Agreement by Nature One (which is to be determined by reference to the identification of a causal link between the alleged conduct and the loss of an appreciable commercial opportunity).[17]
B.6.2 Clarity of the proposed amended pleading
[15]See Sellars v Adelaide Petroleum NL (1994) 179 CLR 332, 348.8 (Mason CJ, Dawson, Toohey and Gaudron JJ). See also The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64, 92.7 (Mason CJ and Dawson J), 102.2, 103.2, 104.1 (Brennan J).
[16]Wilson v Bauer Media Pty Ltd [2018] VSCA 154, [355] (Tate, Beach and Ashley JJA); Masters Home Improvement Pty Ltd v North East Solution Pty Ltd [2017] VSCA 88, [411]; Sellars v Adelaide Petroleum NL (1994) 179 CLR 332, 355.2 (Mason CJ, Dawson, Toohey and Gaudron JJ); The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64, 103.9, 104.4 (Brennan J), 118.5 (Deane J).
[17]Bauer Media Pty Ltd v Wilson (No 2) [2018] VSCA 154, [463]; The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64, 104.1 (Brennan J).
Finally, Nature One argued that the proposed amended Statement of Claim does not sufficiently identify the commercial or business opportunity that Opti-Pharm could otherwise have taken advantage of if not for the alleged breach and repudiation of the Agreement.
The loss claimed in the Statement of Claim by reason of the alleged breaches of the Agreement is expressed as:
The loss of an opportunity to sell into Chinese markets its infant milk formula by reason of it not having a brand slot registered with [the Accreditation Administration].
(Emphasis added.)
The evidence indicates that successful registration with the Accreditation Administration results in the allocation of 9 product formula “slots” or “spots”, comprised of 3 product series of 3 product formulas each. For example, 1 product series may comprise 3 product formulas for the infant stages of 0‑6 months, 6-12 months and 12‑36 months. Product slots enable a foreign manufacturer to import product brands to China. It was not clear on the evidence whether registration with the Food and Drug Administration is a further prerequisite to the allocation or utilisation of product slots. In any event, for the purposes of either application, nothing turns on this.
C. Legal principles
Given that Nature One maintained its Summary Judgment Application irrespective of whether the Amendment Application was successful, the correct approach is to consider whether the proposed amended Statement of Claim discloses a case that has a real prospect of success, or whether the Summary Judgment Application should be upheld notwithstanding the proposed amendments.[18]
[18]Mandie v Memart Nominees Pty Ltd [2016] VSCA 4, [36]-[48] (Kyrou, Ferguson and McLeish JJA).
C.1 Summary judgment
Section 62 of the Civil Procedure Act provides:
A defendant in a civil proceeding may apply to the court for summary judgment in the proceeding on the ground that a plaintiff’s claim or part of that claim has no real prospect of success.
(Emphasis added.)
Section 63(1) of the Civil Procedure Act provides:
Subject to section 64, a court may give summary judgment in any civil proceeding if satisfied that a claim, a defence or a counterclaim, as the case requires, has no real prospect of success.
(Emphasis added.)
Section 64 of the Civil Procedure Act provides:
Despite anything to the contrary in this Part or any rules of court, a court may order that a civil proceeding proceed to trial if the court is satisfied that, despite there being no real prospect of success the civil proceeding should not be disposed of summarily because –
(a) it is not in the interests of justice to do so; or
(b) the dispute is of such a nature that only a full hearing on the merits is appropriate.
The principles applicable to summary judgment are well established. The question of whether a case has no real prospect of success requires determination of whether there is a real as opposed to a fanciful chance of success.[19] The statutory test is broader than the question of whether the case is “hopeless” or “bound to fail”.[20] The power to award summary judgment is to be exercised with caution and only where there is plainly no real question to be tried.[21]
[19]Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27, 39 [29] (Warren CJ and Nettle JA).
[20]Ibid.
[21]Ibid, 38 [27]-[28] (Warren CJ and Nettle JA).
C.2 Leave to amend pleadings
Rule 36.01(1)(a) of the Supreme Court Rules empowers the court to grant leave to any party to amend any document for the purpose of determining “the real question in controversy between the parties to any proceeding”. Leave may be granted at any stage of the proceeding.
In deciding whether to grant leave to a party to amend its pleadings, the court must consider whether the proposed amendments facilitate the identification of the real issues in dispute and the just resolution of the proceeding.[22]
[22]AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, 204-205 [69] (Gummow, Hayne, Crennan, Kiefel and Bell JJ). See also ABL Nominees Pty Ltd v Mackenzie (No 2) [2014] VSCA 529, [17] (Derham AsJ).
The power to grant leave to amend is a discretionary power. It follows that there is no right or entitlement for a party to amend its pleading subject to the payment of costs referable to the amendment.[23] Leave will not be granted for an amendment that would be futile in the context of a case that otherwise has no relevant prospect of success.[24] The nature and importance of the proposed amendments must be considered.[25] In particular, case management considerations such as cost, delay and the potential for unfair prejudice to other parties to the proceeding, the court and other litigants must also be taken into account.[26]
D. Ruling
[23]AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, 212 [96], 213 [99], 217 [111].
[24]ABL Nominees Pty Ltd v Mackenzie (No 2) [2014] VSCA 529, [18].
[25]AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, 214 [102].
[26]Ibid, 213 [98]-[99], 214-215 [102], 217 [111]; Civil Procedure Act, s 7.
D.1 Amendment Application
The proposed amendments to the Statement of Claim seek to remedy the deficiencies identified in the Summary Judgment Application. The amendments include a claim that Nature One was under an obligation to obtain “all Chinese regulatory registrations necessary to permit the Product to be sold in the Chinese retail market”. This has the result that the pleaded breach of the Agreement by Nature One corresponds to a pleaded obligation.
The question of whether the Registration Obligation only requires Nature One to use its best endeavours to obtain registration of the Brand with the Accreditation Administration, or whether it also extends to obtaining registration of the Product with the Food and Drug Administration, is a question of construction. It is arguable that the clause is sufficiently ambiguous so as to allow consideration of the surrounding circumstances, including the genesis of the transaction and prior negotiations.[27]
[27]Mount Bruce Mining Pty Ltd v Wright Prospecting (2015) 256 CLR 104, 116 [47], 117 [49] (French CJ, Nettle and Gordon JJ); State Rail Authority of New South Wales v Codelfa Construction Pty Ltd (1982) 149 CLR 337, 352.2 (Mason J).
The proposed amended Statement of Claim squarely raises the question of the true meaning of the Registration Obligation. If the construction advanced by Opti-Pharm is not accepted, it seeks rectification of the Registration Obligation to reflect the alleged common intention of the parties at the time of entering the Agreement. Opti-Pharm relies on the fact that the Registration Obligation was taken from a template agreement and was not negotiated between the parties.[28]
[28]Cf Leibler v Air New Zealand Ltd (No 2) [1999] 1 VR 1, 19 [49] (Kenny JA).
The amendments proposed by Opti-Pharm are therefore relevant to the fundamental matters in dispute between the parties. A satisfactory explanation has been given in respect to the basis for the amendments.
Further, this litigation is not relatively advanced. The proceeding was commenced in late 2017. Trial orders have not been made and the proceeding has not been set down for trial. Granting leave to Opti-Pharm to amend its Statement of Claim will not occasion undue delay or unfair prejudice, and will facilitate the determination of the real issues between the parties. Furthermore, Opti-Pharm accepts that it should pay the costs occasioned by the Amendment Application.
In these circumstances, leave will be granted for Opti-Pharm to file and serve the proposed amended Statement of Claim in the form annexed to the Amendment Application.
D.2 Summary Judgment Application
There is a real question as to the proper construction of the Registration Obligation. Accordingly, there is a real prospect that Opti-Pharm will be successful in its claims as to the construction of the Registration Obligation. Even if this conclusion is incorrect, the rectification claim having been introduced with sworn evidence to support it, means that summary disposal of the question of the true agreement between the parties would be entirely inappropriate.
Ultimately, there remain several questions that are properly matters for trial:
(1) Whether Opti-Pharm is entitled to a refund of the Deposit.[29]
[29]Contrary to Nature One’s written submissions, it was conceded during oral argument that the issue of whether or not this amount was repayable was properly a matter for trial.
(2) Whether Opti-Pharm is entitled to a transfer of the Trade Marks registered by Nature One in its own name.[30]
[30]Although this is unlikely to be controversial: see fn 6 above.
(3) Whether the Agreement was on foot at the time it was allegedly breached by Nature One, including whether there was a waiver of the Minimum Order Requirement and whether Nature One is estopped from denying the continuation of the Agreement for the Term Extension.
(4) The scope of the Registration Obligation.
(5) Whether Nature One repudiated the Registration Obligation, thereby entitling Opti-Pharm to terminate the Agreement. In this regard, there may also be a question as to the extent of the applicable Chinese regulatory requirements for infant milk formula.
(6) Whether Opti-Pharm has suffered any compensable loss or damage referable to the alleged breaches and repudiation of the Agreement. If the repudiation is established, this will require consideration of the value of the commercial opportunity that Opti-Pharm claims to have lost by reason of Nature One’s conduct.
What is set out above is sufficient to dispose of the Summary Judgment Application. However, it should be added that, given the concession, correctly made, that there is a triable issue with respect to the Deposit, it is likely that much, if not all, of the underlying relationship between the parties will necessarily be the subject of the trial. This is a further reason why the Summary Judgment Application should be dismissed.
E. Conclusion
For these reasons, the Amendment Application is allowed and the Summary Judgment Application is dismissed.
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