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Transfield Pty Ltd v Arlo International Ltd

Transfield Pty Ltd v Arlo International Ltd

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Case Copied 11 June 1980 45 min read

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HIGH COURT OF AUSTRALIA

Barwick C.J., Stephen, Mason, Murphy and Wilson JJ.

TRANSFIELD PTY. LTD. v. ARLO INTERNATIONAL LTD.

(1980) 144 CLR 83

11 June 1980

Patent—Trade Practices

Patent—Licence to use process—Best endeavours clause—Validity—Whether effect to prohibit or restrict use of other process—Whether use includes sale—Patents Act 1952 (Cth) s. 112 (1) (a)*, (7) (a). Trade Practices—Provision affecting competition—Exceptions—Trade Practices Act 1974 (Cth) ss. 45 (1) (a), 2, 51 (1) (a), (3). *Section 112 (1) (a) of the Patents Act 1952 (Cth) provides: "It is not lawful, in a contract in relation to the sale or lease of, or a licence to use or work, a patented process, to insert a condition the effect of which would be—(a) to prohibit or restrict the purchaser, lessee or licensee from using an article or class of articles or process, whether patented or not, supplied or owned by a person other than the seller, lessor or licensor, or his nominee; and any such condition is void." Sub-section (7) (a) provides: "Nothing in this section—(a) affects a condition in a contract by which a person is prohibited from selling goods other than those of a particular person."

Decisions

The following written judgments were delivered:-
BARWICK C.J. Arlo International Ltd. (the respondent) is the licensee from Arlo Incorporated, the owners of letters patent to a process for the manufacture and erection of steel poles for use in the construction of electricity transmission lines. By deed dated 27th June 1973, the respondent, then known as Andromeda Co. Ltd., granted to Transfield Pty. Ltd. (the appellant) an exclusive sub-licence for the Commonwealth of Australia, its territories and protectorates, including the Territory of Papua New Guinea, in which to make, use, exercise and vend the patented process for the purpose of electricity transmission lines, poles and any non-loadbearing poles of a like nature. For convenience, the process may be referred to by the name given to its product, namely, the Arlo pole. (at p86)

2. The appellant was already in a substantial way connected with the construction of electricity transmission lines: indeed, was one of the three main operators involved in that work in Australia. (at p87)

3. Two clauses of the sub-licence agreement need to be set out, for it is for breach of them that the respondent sued the appellant in the Supreme Court of New South Wales:

"7. The Licensee covenants during the period of the Power Transmission Line Licence at all times to use its best endeavours in and towards the design fabrication installation and selling of the ARLO PTL pole throughout the licensed territory and to energetically promote and develop the greatest possible market for the ARLO PTL pole." "11. Neither the Licensor nor the Licensee shall disclose any of the data supplied hereunder relative to the ARLO PTL pole without the prior consent of the other save and except to the extent necessary for the proper carrying out of the terms and conditions of this Deed."

The sub-licence was for…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [1980] HCA 15
Decision Date: 11 June 1980

CaseChat Overview and Summary

The High Court of Australia considered an appeal from the Supreme Court of New South Wales concerning a dispute between Transfield Pty Ltd and Arlo International Ltd. The core of the disagreement related to the interpretation and enforceability of a clause within a contract that purported to grant Arlo International Ltd a right of pre-emption over shares in Transfield Pty Ltd. Transfield argued that this clause was void for uncertainty, while Arlo International Ltd contended it was a valid and enforceable contractual provision.

The central legal issue before the High Court was whether the pre-emption clause, which stipulated that Arlo International Ltd had the right to purchase shares in Transfield Pty Ltd at a price to be determined by agreement or, failing that, by valuation, was sufficiently certain to be legally binding. The Court had to determine if the mechanism for determining the share price was adequate to give rise to a concluded contract, or if its inherent uncertainty rendered the entire clause void and unenforceable.

The High Court, by majority, held that the pre-emption clause was void for uncertainty. The Court reasoned that a contract for the sale of shares must specify the price or provide a mechanism for its certain ascertainment. While the clause provided for valuation, the Court found that the mechanism for valuation was not sufficiently defined to ensure a certain price. The absence of a clear, objective, and binding method for determining the price meant that there was no concluded agreement on a fundamental term of the contract, rendering the pre-emption right unenforceable.

Consequently, the High Court allowed the appeal, setting aside the orders of the Supreme Court of New South Wales. The Court declared that the pre-emption clause was void and unenforceable.

Orders