Voudiotis, M. v The Plains Video Libraries P/L

[1993] FCA 563

S 6 3 193 i ,

JUDGMENT NO. ........ ... .... ,. ........ ..., i

IN THE FEDERAL COURT OF AUSTRALIA	)
VICTORIA DISTRICT REGISTRY	)
GENERAL DIVISION	) NO. VG 66 of 1992

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B E T W E E N :

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MICHAEL VOUDIOTIS. MARTHA VOUDIOTIS.	i
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BARNEY VASSILIOU. ROULA VASSILIOU.	I .
THE0 MENTZOS and ELEFTHERIA MENTZOS	I- -
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Applicants	1-
:

- and - I

THE PLAINS VIDEO LIBRARIES PTY LTD

Respondent

Coram :	Olney J
Place:	Melbourne
Date:	17 August 1993

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MINUTE OF ORDERS

THE COURT ORDERS THAT:

1. The respondent be released from the undertaking given by counsel on its behalf on 17 March 1992 not to terminate the license agreement dated 20 July 1989 to which reference is made in paragraph 2 of the statement of claim filed herein except in so far as such undertaking has the effect of restraining the respondent from seeking to terminate the said agreement on any of the grounds referred to in the notice dated 17 February 1992 referred to in paragraph 27 of the statement of claim;

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

1. The costs of the application be in the cause.

JN THE F E D E W COURT OF AUSTRALIA	)
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION	NO. VG 66 of 1992
B E T W E E N :

MICHAEL VOUDIOTIS. MARTHA VOUDIOTIS,

BARNEY VASSILIOU. ROULA VASSILIOU.

THE0 MENTZOS and ELEFTHERIA MENTZOS

Applicants

- and -

THE PLAINS VIDEO LIBRARIES PTY LTD

Respondent

L a m :	Olney J
Place:	Melbourne
Date:	17 August 1993

REASONS FOR JUDGMENT

On 3 March 1993 the applicant commenced proceedings claiming:

1.           An order that the respondent pays the applicants the

amounts of loss and damage suffered by the applicants by

breach of Trade Practices Act 1974 (Cth) pursuant to 5.82 or in consequence of the conduct of the respondent in

thereof.

2.     A declaration that the Notice of Breach of Covenant dated

17 February 1992 is of no force and effect;

3.          An order restraining the respondent from terminating the

agreement or treatang the same as terminated pursuant to the Notice of Breach of Covenant dated 17 February 1992 upon the expiry of fourteen days from 17 February 1992 or any other date;

4.     Damages for breach of the agreement.

5.     An order that the respondent account to the applicants in respect of all advantages such as free products, discounts, rebates, co-operative advertasing, incentives and giveaways received by the respondent or to which the respondent was or is entitled since m or about November 1990 being advantages referrable to orders placed on behalf of stores conducted by the applicants and/or their

franchisees.

6.     All such accounts and inquirres as may be necessary and discovery in aid thereof.

7.     such further or other orders, directions and relref as may be necessary or as the Court may seem appropriate.

In addition an interlocutory injunction until the hearing and

determination of the application was sought in terms of the

injunction sought in paragraph 3 above.

At the first directions hearing before Jenkinson J on 17 March
1992 the following undertaking was given and orders made:

Upon the respondent by its counsel undertaking not to terminate the Licence Agreement dated 20 July 1989 to which reference is made in paragraph 2 of the Statement of Claim until further order -

IT IS ORDERED THAT:-

1.     The respondent file and serve its defence and any cross- claim on or before 25 March 1992.

2.     Any reply or defence to a cross-claim be filed and served on or before 15 April 1992.

3.     Each party give discovery to each opposite party in the proceeding on the orrginating appl~cation and in any cross-claim on or before 29 April 1992.

4. The directions hearing be ad~ourned to 15 May 1992.

5.     Each party's costs of this day's directions hearing be reserved.

6.     There be no order as to costs with respect to the applicants' claims for interlocutory relief.

The record does not disclose whether these orders were made by consent but I presume they were so made upon the undertaking being given.

In the ensuing 17 months the proceedings have not advanced with any degree of alacrity, but it is not necessary to go into the reasons for that. Sufficient to say that by notice of motion filed 2 July 1993 the respondent sought an order that it be released from the undertaking given to the Court on

17 March 1992.

In the statement of claim filed with the application the

applicants plead that on or about 20 July 1989 the applicants

and the respondent entered into an agreement whereby the

respondent agreed to grant to the applicants a licence limited

to the States of Victoria and South Australia to set up,

establish, franchise and/or maintain video stores using the

trademark and businessname of "The Plains Video" in connection	. .
therewith. (In the agreement the applicants are collectively referred to as "the Southern Group".) The statement of claim pleads representations and/or warranties said to have been made or given by the respondent to the applicants prior to entering into the agreement which are said to have been made
to induce the applicants to enter into it and which the	applicants say they relied upon in so doing. Further, various
terms of the agreement are also pleaded. The applicants say that the respondent has committed breaches of the agreement and have suffered loss and damage. A further agreement concerning radio advertising said to have been entered into in late 1990 is also pleaded, as are allegations of breaches of that agreement which are said to have caused the applicants loss and damage. The applicants further claim that the respondent has contravened section 52 of the Trade Practices
Act 1974.
The portion of the statement of claim which is presently relevant is found in paragraphs 27 to 30 inclusive in which it
is pleaded:

27.    Further or in the alternative in breach of the agreement on or about 17 February 1992 the respondent purported to serve on the applicants a notice of breach of covenant dated 17 February 1992 ("the notice").

Particulars

A copy of the notice is in the possession of the solicators for the plaintiff at whose offices it may be examined by appointment.

28.    By the notice the respondent claimed that the applicants were gualty of eaght separate and continuing breaches of the agreement, and clarmed that unless the same were remedied withan 14 days from 17 February 1992:

(a)	any exclusivity or grant of licence to set up, establish, franchise and/or maintain video stores using the trademark or the businessname incorporating the name in the States of Victoria and South Australia would be terminated;
(b)	it reserved its right to demand the sum of $10,000 pursuant to clause 9(i).

29.    The applicants deny that the notice is of force or effect in that:

(a) they are not in breach of any of the covenants of

(b) the notice was not served on them as required in the agreement therein set out; the agreement;

(c) the notice does not purport to provide the period prescribed in the agreement for any breaches thereof to be remedied.

30.   Further the applicants deny that any of the alleged breaches of covenants (which breaches are denaed) could constitute breaches of any fundamental provision of the agreement which would entltle the respondent to c l a m $10,000 pursuant to the term of the agreement set out an paragraph 9 above.

Paragraph 7 of the agreement provides:

Notwithstanding any provision herein contained t h e l i cence hereby granted and t h e agreement here in contained s h a l l

commence on t h e d a t e hereof and s h a l l remain i n fo rce u n t i l it

is terminated by mutual agreement between t h e p a r t i e s unless:

(i) The Southern Group purports t o ass ign t h e b e n e f i t of t h i s

Deed without t h e consent of t h e P la ins Video; o r

(ii) The Southern Group is in breach of any of the provisions

of t h i s Agreement f o r a period of four teen (14) days o r

more a f t e r being required by t h e P la ins Video by no t i ce

i n w r i t i n g t o remedy such breach including where t h e

payment of money not ice i n wr i t ing by t h e P la ins Video

requ i r ing payment within fourteen (14) days and

ind ica t ing t h e Southern Group's f a i l u r e t o make payment

i n accordance with t h a t notice; o r

( i i i ) Terminated by t h e Southern Group by n o t i c e i n wr i t ing

given t o t h e P la ins Video a f t e r it has remained i n breach of a fundamental provision f o r a period of four teen (14) days a f t e r t h e r e c e i p t by t h e P la ins Video of a n o t i c e i n

w r i t i n g requ i r ing t h e Southern Group t o remedy such

breach wi th in fourteen (14) days a f t e r t h e P l a i n s Video's

r e c e i p t of such not ice and ind ica t ing t h e Southern

Group's i n t e n t i o n t o terminate t h e P la ins Vldeo's r i g h t s

under t h i s Deed i n t h e event of t h e P l a i n s Video's

f a i l u r e t o remedy such breach of a fundamental provision.

T h e respondent says t h a t s ince the undertaking was given the

applicants have committed f u r t h e r breaches of t h e agreement

which en t i t l e it t o give notice of breach of covenant pursuant

t o the agreement, and i f the breach is not remedied, t o

terminate the agreement. In fact on o r about 1 0 A u g u s t 1992

the respondent sen t t h e following not ice t o the applicants:

NOTICE OF BREACH OF COVENANT

TO:	MICHAEL VOUDIOTIS and W T H A VOUDIOTIS of 42 Clivejay
S t r e e t ,  Glen Waverley i n t h e S t a t e of Vic tor ia .
BARNEY VASSILIOU and ROULA VASSILIOU of 46 Panorama Drive
Fores t H i l l s i n t h e S t a t e of Victoria .
THE0 MENTZOS and EUFTORIA NENTZOS of 17 Crown's Land Glen
Waverley  i n t h e S t a t e of Vic tor ia ,
( h e r e i n a f t e r c a l l e d t h e "Southern Group")

Wlth reference t o t h e agreement entered l n t o between you and The P la ins Video L ib ra r i e s Pty Ltd dated 20.7.89 and t h e

covenants by you t h e r e i n contained and t h e breaches h e r e i n a f t e r

spec i f i ed of those covenants.

1. In breach of Clause D.2 of t h e s a i d agreement, you have

commenced t o t r a d e and continue t o t r a d e i n video s t o r e s

a t Doncaster and Clayton using t h e name "The P la ins

Vldeo" without f i r s t request ing o r obta in ing t h e approval

of The Plalns Video Libraries Pty Ltd.

2.     In breach of Clause 3 and implied obligations of the sald agreement you have failed to inform our client (even although requested by letter of SA Baker & Associates to Nicholas Giasoumi dated 2nd July, 1992) whether or not you are or remain the owners of the Doncaster Store.

3.     In breach of Clause 3.l(i) and the implied obligations of the said agreement you have closed or sold several stores including stores previously at Ballarat, Morwell, Thornbury, Glenroy and Clayton and failed to provide any details or explanation of such closure or sale even although you have been requested by letters of SA Baker & Associates to Nicholas Giasoumi dated 2nd July, 1992 and 23rd June, 1992.

4.     In breach of Clause 3 and the implied obligations of the said agreement you have failed to provlde any details of current ownership of the store at Clayton using the name "The Plains Video" even although you have been requested to do so by letter SA Baker & Associates to Nicholas Glasoumi dated 23rd June, 1992 and 2nd July, 1992;

and that the breaches listed above are continuing

YOU ARE HEREBY NOTIFIED that you are required to remedy the

aforementioned breaches within fourteen (14) days from the date
hereof and failure to remedy will result in:-

1.     Any exclusivity or grant of licence to set up, establish, franchise and/or maintain video stores uslng the trademark or business name incorporating the name in the States of Victoria and South Australia will be terminated.

2.     The Plains Video will reserve its right to demand the sum of $10,000.00 pursuant to Clause 9(i).

Dated this 10th day of August, 1992.

Signed

........ ....*........ ........ ..
J.C.	Smith for and on behalf of

The Plains Vldeo Libraries Pty Ltd.

Notwithstanding having given this notice the respondent has taken no steps towards terminating the agreement due to the restraint imposed by its undertaking to the Court.

There is no question about the Court's power to release a party from an undertaking in the absence of the consent of the other party even where there has been no mistake operative at

the time it was given (Adam P. Brown Male Fashions Ptv Ltd v Philip Morris Incorporated (1981) 148 CLR 170). Such an order is appropriate whenever, inter alia, new facts come into existence or are discovered which render the enforcement of the original undertaking unjust.

In the present case the undertaking was given in the context of an application to restrain the respondent from terminating the agreement pursuant to the notice of breach dated 17 February 1992 which is referred to in the application. The undertaking was obviously accepted in lieu of the interlocutory injunction which the applicants sought. It would be contrary to the basis on which the undertaking was given and unjust to the respondent to enforce the undertaking in such a manner that it prevented the respondent taking any legitimate action open to it in relation to events which have occurred since it was given, and this is particularly so in circumstances in which the applicants have the benefit of the undertaking without having given a corresponding undertaking

as to damages.

In my opinion, the justice of the case requires that the respondent be released from the undertaking except as to breaches of the agreement which have occurred or are said to have occurred before 17 March 1992. The undertaking should remain in force to the extent that it acts as a restraint against the respondent from seeking to terminate the agreement on any of the grounds referred to in the notice dated

17 February 1992.

I certify that this and the

precedina 7 Daaes are a true - -

copy of the Reasons for Judament
of thk Honourable Mr ~ustice

Olney

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Associate:	i -.
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Dated:	17 August 1993	. :
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Miss L. Krejus (instructed by Giasoumi Zervos & Associates)

appeared for the applicants.

Mr A. Warnick appeared for the respondent.

Date of Hearinq:	2 August 1993
Place:	Melbourne
Date of Judament:	17 August 1993