The Outdoor Furniture Specialists Pty Ltd v Liveris
[2007] WASC 197
•31 AUGUST 2007
THE OUTDOOR FURNITURE SPECIALISTS PTY LTD & ANOR -v- LIVERIS & ANOR [2007] WASC 197
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2007] WASC 197 | |
| Case No: | CIV:1420/2007 | 15 AUGUST 2007 | |
| Coram: | BEECH J | 31/08/07 | |
| 13 | Judgment Part: | 1 of 1 | |
| Result: | Application for summary judgment dismissed | ||
| B | |||
| PDF Version |
| Parties: | THE OUTDOOR FURNITURE SPECIALISTS PTY LTD (ACN 011 058 003) TOFS MARKETING LTD (ACN 015 058 127) PAUL STEPHEN LIVERIS MARGARET LIVERIS |
Catchwords: | Practice and procedure Application for summary judgment Whether triable issue Contract Dispute resolution clause Expert determination clause Whether clause invoked prematurely Whether expert determination effectual |
Legislation: | Nil |
Case References: | Aiton Australia Pty Ltd v Transfield Pty Ltd [1999] NSWSC 996; (1999) 153 FLR 236 Chemeq Ltd v Shepherd Investments International Ltd [2007] WASCA 117 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 Esanda Finance Corporation Ltd v Spence Financial Group Pty Ltd [2006] WASC 177 Home Building Society Ltd v Pourzand [2005] WASCA 242 Hooper Bailie Associated Ltd v Natcon Group Pty Ltd (1992) 28 NSWLR 194 Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2006] FCAFC 144;(2006) 156 FCR 1 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- First Plaintiff
TOFS MARKETING LTD (ACN 015 058 127)
Second Plaintiff
AND
PAUL STEPHEN LIVERIS
MARGARET LIVERIS
Defendants
Catchwords:
Practice and procedure - Application for summary judgment - Whether triable issue
Contract - Dispute resolution clause - Expert determination clause - Whether clause invoked prematurely - Whether expert determination effectual
Legislation:
Nil
(Page 2)
Result:
Application for summary judgment dismissed
Category: B
Representation:
Counsel:
First Plaintiff : Mr G H Murphy SC
Second Plaintiff : Mr G H Murphy SC
Defendants : Mr P N Bevilacqua
Solicitors:
First Plaintiff : Cullen Babington Hughes
Second Plaintiff : Cullen Babington Hughes
Defendants : Mossensons
Case(s) referred to in judgment(s):
Aiton Australia Pty Ltd v Transfield Pty Ltd [1999] NSWSC 996; (1999) 153 FLR 236
Chemeq Ltd v Shepherd Investments International Ltd [2007] WASCA 117
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337
Esanda Finance Corporation Ltd v Spence Financial Group Pty Ltd [2006] WASC 177
Home Building Society Ltd v Pourzand [2005] WASCA 242
Hooper Bailie Associated Ltd v Natcon Group Pty Ltd (1992) 28 NSWLR 194
Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2006] FCAFC 144; (2006) 156 FCR 1
(Page 3)
1 BEECH J: The plaintiffs have applied for summary judgment in respect of their claims against the defendants. The chamber summons sought summary judgment in respect of all the claims pleaded in the statement of claim. However, following the filing of affidavits by both parties, the plaintiffs confined their application for summary judgment to two claims: a claim for $54,852.95 and a claim for $9,012.97. The way in which those claims are said to arise is explained below.
The facts
2 While there are, evidently, a great many matters in dispute between the parties, the facts relevant to this application are not in substantial dispute.
3 The first plaintiff is a franchisor of specialist outdoor furniture retail stores, trading under the name 'The Outdoor Furniture Specialists'. The second plaintiff is a related company involved in marketing for the first plaintiff.
4 The defendants were franchisees of the first plaintiff from 2000 until at least late 2006. Relevantly, there were three franchise stores operated by the defendants, at Osborne Park, Cannington and O'Connor.
5 Each franchise agreement provided that the franchisee would pay to the franchisor marketing contributions or marketing fees calculated as a percentage of the value of gross sales.
6 By the first half of 2006, substantial disputes had arisen between the first plaintiff franchisor and the defendants. Among the matters in dispute were the applicable percentage rate to be applied to the calculation of marketing contributions and the question of the proper identification of the turnover to which such rate was to be applied. There were also many other matters in dispute between the parties but it is not necessary to detail those here.
7 In about the middle of 2006 the defendants instituted proceedings in this court (CIV 1832 of 2006). Interlocutory injunctions were granted restraining the termination of the franchise agreements on the basis of notices which had been issued by the franchisor.
8 On 18 October 2006, following mediation in those proceedings, the parties entered into a deed of settlement.
9 The plaintiffs allege that the defendants have failed to perform their obligations under the deed of settlement. In April 2007 the plaintiffs
(Page 4)
- commenced these proceedings to seek to enforce the deed of settlement against the defendants.
10 The settlement deed made provision for what would occur in respect of each of the three stores. As those provisions do not directly relate to the claims the subject of this application I will do no more than give a broad overview of those provisions.
11 The overall scheme of the settlement deed was that by 31 January 2007 the franchise relationship between the parties would come to an end. Two of the stores (Cannington and O'Connor) would, by that date, either be sold to a third party or transferred by the defendants to the first plaintiff. The Osborne Park store was to be put on the market. The first plaintiff was given an option to purchase the store at an identified value. If the store was not sold by 31 December 2006 and if the first plaintiff did not exercise its option to acquire at the specified value, the defendants could keep the store and continue to operate it as their own store provided that they 'debadged' the store.
12 The Cannington and O'Connor stores were transferred by the defendants to the first plaintiff on 1 February 2007. The defendants have retained the Osborne Park store. There appears to be issues between the parties as to whether the store has been properly 'debadged' but those issues do not bear upon the present application.
13 The subject matter of the plaintiffs' application for summary judgment, as confined by its submissions, is the obligations of the defendants under cl 7 of the settlement deed. It is convenient to set out the provisions of cl 7 in full:
7. ADVERTISING FEES
7.1 The Parties agree that an amount of 2.5% of turnover is the minimum amount payable to TOFS Marketing pursuant to each of the Franchise Agreements (the 'Marketing Contributions').
7.2 The Liveris' must pay that amount (less all payments already made on account of Marketing Contributions as set out in each respective Franchise Agreement by the Liveris') to TOFS Marketing until the completion of sale or completion of handover or debadging pursuant to clause 11 as the case may be.
7.3 Subject to clauses 7.4 and 7.5, in addition to the percentage set out in clause 7.1, the further Marketing Contributions which must be paid by the Liveris' to TOFS Marketing shall be calculated pursuant to the relevant Franchise Agreements as follows:
- 7.3.1 for all periods up to and including 30 June 2006, at a rate of 6% of total turnover;
7.3.2 from and including 1 July 2006 up to and including 31 October 2006, at a rate of 4% of total turnover; and
7.3.3 from and including 31 October 2006 up to and including 31 January 2007 (or any extended term which may be agreed between the Parties), at a rate of 2.5% of total turnover; but
7.3.4 in any case excluding any Marketing Contributions claimable in respect of the business operated by the Liveris known as 'Blue Sky'
- 7.4 In the event that either or both the O'Connor Store and the Cannington Store is or are transferred to TOFS after 31 December 2006, then the Marketing Contributions will only be paid on a pro-rata basis at the rate of 2.5% calculated from and including 1 April 2006 up to and including 31 December 2006.
7.5 In the event that there is a debadging of the Osborne Park Store pursuant to clause 11, then the Parties agree that then the Marketing Contributions will only be paid on a pro-rata basis (one third of the total) at the rate of 2.5% calculated from and including 1 April 2006 up to and including 31 December 2006.
7.6 The Parties acknowledge that there is a dispute in relation to Marketing Contributions based on the matters set out in the letter from TOFS to Liveris dated 21 April 2005 but issued on or about 21 April 2006 (the 'Disputed Contributions'). To resolve that dispute, the Parties agree that:-
7.6.1 the Liveris' must, within 14 days of the date of this Deed, provide to TOFS Marketing, consolidated Profit and Loss accounts for all furniture businesses conducted by the Liveris' from 30 June 2001, up to and including 30 June 2006;
7.6.2 TOFS Marketing will calculate the total amount of turnover from all furniture businesses operated by the Liveris' in that period (except in the case of the Claremont and Joondalup stores, which will be calculated up to the date of the completion of the sale of those stores only);
7.6.3 TOFS must then calculate the Marketing Contributions that would be payable on that turnover, and then deduct all of the Marketing Contributions actually paid to TOFS or TOFS Marketing;
7.6.4 the Liveris' must then pay any extra amount that would be payable pursuant to any Franchise Agreement, at the then
- applicable rates. If there is no amount payable then TOFS will withdraw its invoices with respect to those Disputed Contributions, and no further amount will be payable with respect to the Disputed Contributions;
- 7.6.5 alternatively, if a lesser amount than claimed by TOFS remains payable, then TOFS may only claim, and the Liveris' must pay, that reduced amount;
7.6.6 if any Party disagrees as to the amount calculated, or the method and manner of calculation, then that Party must write to the other Parties within 7 days of TOFS Marketing proving written notice of the amount claimed to the Liveris' setting out their reasons for their disagreement and the calculations as to what that Party says is the correct amount;
7.6.7 the other Parties may then accept or reject that response within 7 days;
7.6.8 if the Parties cannot agree after the response in the preceding clause, then any Party may refer the Disputed Contributions amount to Mr Derek Vickers of PriceWaterhouseCoopers Perth, or such other person as the parties may agree or if no agreement then such person as the president of the Western Australian Law Society may nominate, who will act as an independent expert and determine the amount payable (if any), and the Parties agree to accept his determination as final and binding;
7.6.9 the Party whose calculation is the largest amount different to the amount determined by Mr Vickers (or such other person as may be appointed) must pay his costs of the determination; and
- 7.6.10 any amount payable to TOFS Marketing or Mr Vickers pursuant to this clause 7 must be paid within 7 days of the determination, without set off or deduction on any account whatsoever.
- 7.7 The Parties agree that the monies in the TOFS marketing fund for Perth will be reasonably expended during the currency of this Deed on advertising in and around Perth. Such expenditure will be in accordance with clause 15.10 of the O'Connor Franchise Agreement.
14 On 31 October 2006 the defendants sent to the plaintiffs their consolidated profit and loss accounts for the period 1 July 2001 to 30 June 2006, except that for the year ended 30 June 2003 they sent only their accounts for the Osborne Park store. That error was corrected on
(Page 7)
- 14 November 2006 when the defendants sent their consolidated profit and loss accounts for the financial year ended 30 June 2003 to the plaintiffs, thereby complying (albeit belatedly) with cl 7.6.1 of the deed of settlement.
15 Pursuant to cl 7.6.2 and cl 7.6.3, the plaintiffs then calculated the marketing contributions payable on the total turnover and deducted marketing contributions paid already. On the basis of that calculation, in late November 2006 the plaintiffs demanded the sum of $49,280.50 for additional marketing contributions, plus GST.
16 Pursuant to cl 7.6.6 the defendants wrote to the plaintiffs on 30 November 2006 setting out their disagreement as to the amount calculated, the reasons for their disagreement and their calculations as to what the defendants said was the correct amount (namely nil).
17 On 5 December 2006 the plaintiffs' solicitors wrote to Mr Derek Vickers of PriceWaterhouseCoopers. The letter set out some background facts, including the fact that the parties had entered into the deed of settlement. The letter then stated that '[p]ursuant to clause 6.2.8 of the deed of settlement, the parties cannot agree on an amount payable by the Liveris' to our client under the deed of settlement. As such, pursuant to that clause, our client wishes to refer that dispute to you so that you may act as an independent expert in determining the amount payable (if any) by the Liveris' to our client.'
18 On 14 December 2006 the defendants wrote to the plaintiffs' solicitors. In their letter the defendants referred to the facsimile of 30 November 2006, observing that they had not received a response accepting or rejecting their letter within seven days and stating that, accordingly, by operation of cl 7.6.7 the lack of response was taken as an acceptance of the amount they said as correct. The letter also stated that the defendants disagreed with the referral of the matter to Mr Vickers.
19 The defendants did not engage in the process involving Mr Vickers.
20 They did not sign the letter of engagement of Mr Vickers.
21 By letter of 24 January 2007, Mr Vickers set out his determinations. He determined that an amount of $54,852.95 was payable by the defendants to the plaintiffs in respect of the marketing contributions for the period in question.
(Page 8)
The issues on this application
22 In their statement of claim, the plaintiffs claim an amount comprised of various sums, one of which is the sum of $54,852.95 as determined by Mr Vickers.
23 The plaintiffs seek summary judgment in respect of the claim for $54,852.95. They also seek summary judgment in respect of their claim for the sum of $9,012.97. That latter claim will be dealt with later in these reasons.
24 The written submissions filed on behalf of the plaintiffs sought judgment in respect of the sum of $49,492.64, based upon what was described as the primary liability under cl 7.6.4. However, in the end, at the hearing of the application for summary judgment, the plaintiffs put their case for summary judgment solely on the basis of the claim for $54,852.95 arising from Mr Vickers' determination and arising under cl 7.6.10.
25 The defendants advance two reasons why summary judgment ought not be given in respect of that claim. Both are said to be reasons why the purported referral to Mr Vickers was invalid or ineffectual.
26 First, it is argued that before a referral to Mr Vickers could be valid, both parties must have agreed that the dispute was to be referred to him, and this did not occur. Second, the defendants contend that the purported referral to Mr Vickers was premature in that the plaintiffs had not rejected the defendants' position set out in the letter of 30 November 2006 and the parties had not attempted to agree the position after a response by the plaintiffs under cl 7.6.7.
27 The principles applicable to an application for summary judgment were not in issue on this application. Indeed, neither party made any reference to them. The principles are well known and I do not propose to restate them. By way of example I would refer to the statement of principles by Master Newnes (as his Honour then was) in Esanda Finance Corporation Ltd v Spence Financial Group Pty Ltd [2006] WASC 177 [41] - [44].
The defendant's first argument
28 Clause 7.6.8 entitled a party to 'refer the Disputed Contributions amount to Mr Derek Vickers of PriceWaterhouseCoopers Perth, or such other person as the parties may agree or if no agreement then such person as the president of the Western Australian Law Society may nominate'.
(Page 9)
- The defendant submits that the words 'as the parties may agree' affect the reference to Mr Vickers so that the clause requires there to be an agreement by the parties as to the use of Mr Vickers, prior to his engagement, in the same way as such agreement is required in relation to any 'other person'.
29 The defendants submit that it is only by such construction that the words 'or such other person as the parties may agree or if no agreement then such person as the president of the ... Law Society may nominate' are given effect. The defendants contend that those words would not be given 'real effect' if Mr Vickers' appointment could be made unilaterally.
30 Further, the defendants argue that the provision is ambiguous so that evidence of surrounding circumstances will be admissible, and such evidence is capable of bearing upon the resolution of the ambiguity.
31 In my opinion, the construction advanced by the defendants is untenable and incapable of finding support in any evidence as to surrounding circumstances.
32 The construction advanced on behalf of the defendants would give no content to the inclusion in the clause of the specific reference to Mr Vickers. The defendants' construction would be tantamount to reading the clause as if it entitled a party to refer the dispute to 'such person as the parties may agree or if no agreement then such other person as the president of the Law Society may nominate'. I can see no justification in the language, structure or evident purpose of the clause for such a reading.
33 In the course of submissions, counsel for the defendants was invited to identify the content or effect of the specific reference to Mr Vickers in the clause (on the defendants' construction of the clause). Counsel submitted that the effect of the specific reference to Mr Vickers was that he was someone who could be 'latched onto immediately'; that the parties could then begin the search for an agreed expert by seeing whether they agreed that Mr Vickers be appointed; and that the parties 'needed to agree Mr Vickers as much as they needed to agree another person'. In my opinion, such a reading of the clause would render the reference to Mr Vickers devoid of any legal or practical content.
34 In my opinion, the plain meaning of the words of the clause supports the following construction of how it operates. When an entitlement to refer a dispute arises, either party is entitled to refer it to Mr Vickers. If he is unable or unwilling to deal with it, the dispute will be referred to such other person as the parties agree, and if the parties do not agree then
(Page 10)
- the dispute will be referred to such person as the president of the Law Society nominates. Further, if both parties agree not to refer the dispute to Mr Vickers then it may be referred to such other person as they agree upon and failing agreement to such other person as the president of the Law Society nominates.
35 Counsel for the defendants was invited to identify any potential subject matter of evidence as to surrounding circumstances that might be capable of affecting the construction of the clause in this regard. Counsel responded by submitting that the surrounding circumstances might establish that 'there was agreement that Mr Vickers be used'. In my opinion, resort to such evidence would not be permissible. It is sufficient in this regard to refer to the judgment of Mason J in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337, 352. Evidence of prior negotiations is admissible for some purposes but not for others. Insofar as it is establishes objective background facts known to the parties, or the genesis, purpose and object of the transaction, then it would be admissible. But, insofar as the evidence consists of statements and actions of the parties reflective of their actual intentions and expectations, such evidence is inadmissible. Such statements reveal the terms of the contracts which the parties intended or hoped to make. They are superseded by or merged in the contract. Evidence of prior oral agreement or 'preliminary consensus' (see Codelfa 354) of the parties is inadmissible in the context of construction (though admissible in an action for rectification).
36 There has been considerable recent judicial discussion of the continuing authority of aspects of the statements of principle made by Mason J in Codelfa. In particular, the extent to which ambiguity must be established before evidence of surrounding circumstances is admissible has been analysed in a number of recent cases. See, for example, Home Building Society Ltd v Pourzand [2005] WASCA 242 [25] - [33]; Chemeq Ltd v Shepherd Investments International Ltd [2007] WASCA 117 [154]; Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2006] FCAFC 144; (2006) 156 FCR 1. However, at least as I understand it, none of that discussion has given rise to doubts as to the continuing authority of the passage of the judgment of Mason J referred to above. In that regard I note that it was applied by McLure JA (with whom Wheeler JA agreed) in Chemeq [155] - [156].
37 For these reasons I conclude that the defendants' first argument is untenable.
(Page 11)
38 I move to the defendants' second argument.
Was the referral to an expert premature?
39 The defendants' second argument fixes upon the opening phrase of cl 7.6.8. The defendants submit that those words condition the existence of the power on the part of any party to refer the dispute for expert determination. The defendants emphasise the language of the opening words of the clause. In particular, those words are in terms that the parties cannot agree after the response in cl 7.6.7.
40 The defendants contend that the opening words of cl 7.6.8 should be construed in the following way. Pursuant to cl 7.6.6 a party disagreeing with the original calculation of the amount due must write to the other parties within seven days setting out the reasons for their disagreement and their calculations. The original party who performed the calculation may then accept or reject the response received, within seven days of it. It is that rejection which is the 'response in the preceding clause' referred to in cl 7.6.8. Clause 7.6.8 requires, before it comes into operation, that the parties cannot agree after the cl 7.6.7 response. That requires, first, that a rejection be sent to the disagreeing party and, second, that after the rejecting response is received, attention be given to whether the parties can reach agreement. The defendants submit that those two requirements were not met in this case because the plaintiffs did not first reject the defendants' position set out in their letter of 30 November 2006 and then subsequently (once it was clear that the parties could not agree) refer the dispute to Mr Vickers. Rather, by their solicitors' letter of 5 December 2006, and without otherwise having responded to the plaintiffs' letter of 30 November 2006, the plaintiffs referred the dispute to Mr Vickers, stating in the letter that 'the parties cannot agree' on the amount payable.
41 The plaintiffs invite a different construction of cl 7.6.7 and cl 7.6.8. They submit that the phrase 'the parties cannot agree after the response in the preceding clause' should be read as meaning, in effect, if the parties have not, upon or in the light of the response in the preceding clause, agreed. In effect, that invites a reading of the opening words as if they said 'if the response referred to in the preceding clause is a rejection'.
42 In support of that construction they point to the several steps in cl 7.6.3 (the TOFS parties calculate and claim an amount), cl 7.6.6 (the defendants write, setting out their position, with reasons) and cl 7.6.7 (the TOFS parties reject the defendants' position) that occur before the occasion arises for invocation of the expert determination procedure in cl 7.6.8. The defendants submit that the presence of those steps militates
(Page 12)
- against reading cl 7.6.8 as meaning that the parties must confer further to attempt to agree and must not refer the matter for expert determination until that has occurred.
43 The plaintiffs submit that the construction for which they contend is supported when regard is had to the evident purpose of cl 7.6. They submit that there would be little or no point in requiring the further step of attempting to agree, after receipt of the response, when the several steps referred to will have already occurred and when it is always open to the parties to agree after the referral of the dispute to the expert for determination.
44 In written submissions filed (with leave) after the hearing of the application, the plaintiffs place reliance upon a number of cases, including Hooper Bailie Associated Ltd v Natcon Group Pty Ltd (1992) 28 NSWLR 194 and Aiton Australia Pty Ltd v Transfield Pty Ltd [1999] NSWSC 996; (1999) 153 FLR 236. The plaintiffs submitted that those cases demonstrate that it was necessary to determine whether the clause, when properly construed, satisfied the legal requirements necessary for the provision in question to be enforceable.
45 However, the cases relied upon by the plaintiffs seem to me to arise in a somewhat different context. In those cases, the contract between the parties contained a clause by which the parties agreed to utilise an alternative dispute resolution process. In each case, rather than using the agreed dispute resolution procedure, a party had commenced proceedings. The defendant to those proceedings then sought to invoke the alternative dispute resolution clause as a ground for staying the court proceedings. In that context, the question arose as to whether the dispute resolution clause was enforceable, in that the defendant sought to enforce the clause by invoking it as the ground for a stay of the proceedings commenced in court.
46 By contrast, in the present case the plaintiffs have invoked the alternative dispute resolution procedure in the agreement. The question is whether they have done so in a way which is valid and effectual. In turn that invites attention to whether the opening line conditions the existence of the power to invoke the procedure and, if so, what it means.
47 While there is force in the arguments of the plaintiffs, as summarised above, the language of the clause provides some support for the construction advanced on behalf of the defendants. As counsel for the defendants submits, if the parties had intended there to be no further
(Page 13)
- condition, for the ability of a party to invoke the alternative dispute resolution procedure, than the rejection by the TOFS parties under cl 7.6.7, that intention could have been simply and clearly expressed by words such as 'if the response referred to in the preceding clause is a rejection'. Further, the opening word 'if' in cl 7.6.8 is capable of being read as supporting a construction of the clause that the power to refer the dispute to an expert arises only in the circumstances that 'the parties cannot agree after the response in the preceding clause'.
48 In my opinion, taking account of the matters referred to above, the construction advanced by the defendants is arguable. I am unable to be satisfied that there is no real question to be tried in this regard. Accordingly, the plaintiffs' application for summary judgment in respect of this claim must fail.
The claim for $9,012.97
49 The second claim in respect of which the plaintiffs seek summary judgment is a claim for $9,012.97. That is the amount the plaintiffs claim is due in respect of marketing contributions for the month of January 2007. They refer, in that regard, to cl 7.3.3.
50 The defendants submit that, in the events that happened, on a proper construction of cl 7, no amount is payable in respect of marketing contributions for the month of January 2007. They rely upon cl 7.4 and cl 7.5 of the settlement deed.
51 Those clauses provide that if the events referred to in those clauses occurred then marketing contributions would 'only be paid … up to and including 31 December 2006'. (It is common ground that the events referred to clauses 7.4 and 7.5 did occur.)
52 There seems to me to be an alternative available construction of cl 7.3, cl 7.4 and cl 7.5 which would support the plaintiffs' claim. Those clauses might be read as adjusting the level of marketing contributions only for the period 1 April 2006 to and including 31 December 2006, so leaving other periods referred to in cl 7.3 unaffected. However, the defendants' position seems to me to be, at the very least, readily arguable, so that summary judgment is not appropriate.
Conclusion
53 For the reasons given, the plaintiffs' application for summary judgment should be dismissed. I will hear the parties as to costs.
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