Servco Pty Ltd v AGL Sales Pty Limited
[2010] VCC 85
•26 February 2010
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
CIVIL DIVISION
COMMERCIAL – GENERAL DIVISION
Case No. CI-09-06006
| SERVCO PTY LTD | Plaintiff |
| (ACN 100 936 454) | |
| v | |
| AGL SALES PTY LIMITED | Defendant |
| (ACN 090 538 337) |
---
| JUDGE: | HIS HONOUR JUDGE GINNANE |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 25 February 2010 |
| DATE OF RULING: | 26 February 2010 |
| CASE MAY BE CITED AS: | Servco Pty Ltd v AGL Sales Pty Limited |
| MEDIUM NEUTRAL CITATION: | [2010] VCC 0085 |
JUDGMENT
---
Catchwords: Contract – Licence Agreement – Reasonable access to licensee’s records- Licensee’s notice of inspection of records- Whether notice valid- Serious question to be tried- Interlocutory injunction granted
---
| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | M.Campbell | Mason Sier Turnbull |
| For the Defendant | S.Hay | Thomson Playford Cutlers |
| HIS HONOUR: |
1 The plaintiff provides industry support services to the power industry and, in particular, to the defendant which operates in the gas and industry sectors.
2 The legal relationship of the plaintiff and the defendant is governed by a Licence Agreement, of which Clause 12.1(m) and Clauses 35.2 are particularly relevant. Clause 12.1(m) provides that the Licensee will –
“allow the Company, its employees, agents and representatives reasonable access, at all reasonable times, to the Licensee’s records (held in whatever form) as is reasonably necessary to enable the Company to:
(i) assess the Licensee’s performance of its obligations under this Agreement;
(ii) assess the accuracy of payments made by the Licensee to the Company under Clause 16;
(iii) assess the Licensee’s financial position.”
3 Clause 16 deals with royalties.
4 Clause 35 deals with termination of the Licence and Clause 35.2 deals with termination by the Company for breach by the Licensee of the Licence and provides a regime of giving reasonable notice of breach and an opportunity to remedy the breach.
5 On 24 December 2009, the Court granted an interlocutory injunction to restrain the defendant from terminating the Licence Agreement upon the Notice that had been given.
6 The business relationship under the Licence Agreement continues. The trial is fixed for 15 June 2010.
7 From late 2009 to earlier this month, in February, the defendant has served various Default Notices upon the plaintiff, some of which has been withdrawn.
8 On 12 February 2010, the plaintiff served an advanced Notice of Inspection which, omitting provisions dealing with the period covered by the Notice, gave notice that the defendant sought to inspect records relating to the purposes set out in Clause 12.1(m) of the Licence.
9 There was then correspondence between the solicitors. On or about 22 February 2010, the plaintiff served on the defendant a Notice of Breach under Clause 35, alleging failure to enable the Licensor reasonable access to records, and gave until Monday, 1 March 2010 at 9.00 am to remedy that breach. This Notice led to the plaintiff’s application for an interlocutory injunction, which is made in the existing proceeding.
10 I consider that there is a serious question to be tried, whether, in the particular circumstances of this case, the defendant has validly exercised the powers under Clause 12 of the Licence to serve the Notice of 12 February 2010 or, validly exercised the powers to serve the Notice of 22 February 2010.
11 The particular circumstances of this case that I identify are:
(a) the existing proceedings and the trial fixed for 15 June 2010; (b) the issues raised in the existing proceedings overlap with the matters relied on to justify the Notice issued under clause 12 eg those matters pleaded in paragraph 57 of the Defence. (c) that the defendant has served previous Notices which have sought access to specific documents. 12 The orders I make this morning are not intended to prevent the defendant seeking access to specific current documents of a character that come within Clause 12.
13 I accept that there is nothing in Clause 12 that in the ordinary run of cases requires the Licensor to nominate particular documents before the power under Clause 12 is exercised. However the access required has to be reasonable access. If the access demanded is arguably not reasonable, then there is a serious question to be tried whether the Licensor has the contractual authority to make the request. In those circumstances any reliance on that request for access to terminate the Contract might be invalid.
14 I, of course, express no concluded view on these issues but I consider that the plaintiff’s arguments raise a serious question to be tried.
15 I also do not express a view on whether a Notice in the form of that of 12 February 2010, in circumstances which did not include the particular matters I have identified, would be valid.
16 I accept the defendant’s submission of the distinction between the discovery obligations in this proceeding and the defendant’s right to exercise powers given under the Licence.
17 I accept that the defendant has concerns about the plaintiff’s operations, in respect in particular of the payment of royalties and solvency. I was referred to the ‘Lawler Report’ of June 2009 and an affidavit of Mr R. Wright. I also accept that the defendant has an interest in ensuring that its licensees are viable.
18 The contract continues despite the litigation. The right to discovery does not stay the power. However, the three circumstances I have mentioned provide an arguable basis for restraining the use of the Licensor’s rights in the manner sought.
19 Nothing in my decision is intended to stop the defendant seeking access to specific, current documents. .
20 It is apparent from previous Notices that it has served that the defendant is aware of specific categories of documents that it might seek. It is therefore not a case where the defendant can legitimately say that it is unable to use more precision in its exercise of the power given by clause 12.
21 I do not grant the interlocutory injunction on the basis that any arguable case bad faith on behalf of the defendant in issuing the Notice under clause 12 has been established.
22 I suggest that the parties should negotiate to attempt to establish a regime for reasonable access to specific documents required by the defendant, pending the outcome of the trial.
23 I will make an order that the pleading be amended to seek orders that the Notices challenged are not authorised by the contract.
24 I do not consider the damages are an adequate remedy because if documents are obtained that ultimately are determined not to have been appropriately obtained, then it will be difficult to redress that situation.
25 For similar reasons, I consider the balance of convenience favours the grant of the injunction.
26 I therefore propose to grant an interlocutory injunction restraining the defendant from acting on the two Notices but reserving leave to apply to vary it if the occasion should require it.
- - -
0
0
0