Weatherbeeta Ltd v Hammersmith Nominees Pty Ltd

[2019] VSC 559

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE
COMMERCIAL COURT

S ECI 2017 00070

WEATHERBEETA LIMITED	First Plaintiff
and
WEATHERBEETA USA INC.	Second Plaintiff
v
HAMMERSMITH NOMINEES PTY LTD	Defendant

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JUDGE:	CONNOCK J
WHERE HELD:	Melbourne
DATE OF HEARING:	1–5, 8–9, 11–12 October 2018; 16, 18 and 29 October 2018, 21 December 2018 and 17 May 2019 (further written submissions/materials)
DATE OF JUDGMENT:	22 August 2019
CASE MAY BE CITED AS:	Weatherbeeta Limited v Hammersmith Nominees Pty Ltd
MEDIUM NEUTRAL CITATION:	[2019] VSC 559

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CONTRACTS – Formation of contracts – Incorporation of terms by reference – Inferred terms – Implied terms – Relevant principles.

CONTRACTS – Termination of distribution agreements – Implied term of reasonable notice – Whether six months’ notice of termination reasonable – Relevant principles.

CONTRACTS – Alleged breach of best endeavours and promotion terms – Distribution agreements.

EVIDENCE – Business records exception to hearsay rule – Section 69 of the Evidence Act 2008 (Vic).

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr R Craig with Mr A McRobert	Norton Rose Fulbright Australia
For the Defendant	Mr G Fitzgerald QC with Ms N Hickey	Davies Collison Cave Law Pty Ltd

TABLE OF CONTENTS

INTRODUCTION AND SUMMARY............................................................................................ 3

BACKGROUND................................................................................................................................. 7

THE ISSUES...................................................................................................................................... 30

WITNESSES, WITNESS STATEMENTS AND EXPERT REPORTS................................... 43

THE UK AGREEMENT TERMS................................................................................................... 46

Relevant Principles and Observations.................................................................................... 46
The UK Express Notice Term.................................................................................................... 56
The UK Extinguishment Term, the UK Trademarks Term and the UK Territory Term.. 91
The UK Best Endeavours Term, the UK Promotion Term, and the Revised Payment Terms  109

THE UK AGREEMENT — THE IMPLIED REASONABLE NOTICE TERM AND ALLEGED BREACH BY BATES AUSTRALIA........................................................................................................ 110

THE UK AGREEMENT — ALLEGED BREACHES BY WEATHERBEETA UK OF THE UK TRADEMARKS TERM AND THE UK EXTINGUISHMENT TERM.......................... 159

THE UK AGREEMENT — ALLEGED BREACH BY WEATHERBEETA UK OF THE REVISED PAYMENT TERMS, AND THE ALLEGED SET OFF BY WEATHERBEETA UK..... 163

THE UK AGREEMENT — ALLEGED BREACHES BY WEATHERBEETA UK OF THE UK BEST ENDEAVOURS TERM AND THE UK PROMOTION TERM....................................... 164

UK AGREEMENT ISSUES — SUMMARY AND CONCLUSION...................................... 164

THE USA AGREEMENT TERMS.............................................................................................. 166

Relevant Principles and Observations.................................................................................. 167
The USA Express Notice Term................................................................................................ 167
The USA Trademarks Term, the USA Extinguishment Term and the USA No Competing Products Term............................................................................................................................................ 190
The USA Best Endeavours Term, the USA Promotion Term, and the Revised Payment Terms         200

THE USA AGREEMENT — THE IMPLIED REASONABLE NOTICE TERM AND ALLEGED BREACH BY BATES AUSTRALIA...................................................................................... 200

THE USA AGREEMENT — ALLEGED BREACHES BY WEATHERBEETA USA OF THE USA TRADEMARKS TERM, USA EXTINGUISHMENT TERM AND THE USA NO COMPETING PRODUCTS TERM................................................................................................................. 203

THE USA AGREEMENT — ALLEGED BREACH BY WEATHERBEETA USA OF THE REVISED PAYMENT TERMS, AND THE ALLEGED SET OFF BY WEATHERBEETA USA... 206

THE USA AGREEMENT — ALLEGED BREACHES BY WEATHERBEETA USA OF THE USA BEST ENDEAVOURS TERM AND THE USA PROMOTION TERM..................................... 207

USA AGREEMENT ISSUES — SUMMARY AND CONCLUSION.................................... 207

ALLEGED BREACHES BY THE PLAINTIFFS OF THE BEST ENDEAVOURS AND PROMOTION TERMS....................................................................................................................................... 209

The Breach Allegations............................................................................................................ 210
Principles and Observations — Best Endeavours and Related Contractual Obligations 213
Some Matters of Evidence — Best Endeavours and Promotion Terms Breach Allegations     222
Allegations of Breach — Alleged to be common to Weatherbeeta UK and Weatherbeeta USA         224
Allegations of Breach Specific to Weatherbeeta UK............................................................ 268
Allegations of Breach Specific to Weatherbeeta USA.......................................................... 271

OTHER MATTERS....................................................................................................................... 293

CONCLUSION............................................................................................................................... 302

KEY DEFINED TERMS................................................................................................................ 303

SCHEDULE A................................................................................................................................. 306

SCHEDULE B................................................................................................................................. 348

HIS HONOUR:

INTRODUCTION AND SUMMARY

1. The first plaintiff (Weatherbeeta UK) and the second plaintiff (Weatherbeeta USA) are wholesale distributors of a broad range of equestrian products in the United Kingdom and in the United States, respectively.  Although a significant proportion of the sales and gross profit of the plaintiffs’ businesses[1] are derived from the sale of equestrian products supplied by entities other than the defendant (Hammersmith Nominees Pty Ltd, trading as Bates Australia),[2] Weatherbeeta UK and Weatherbeeta USA were, for many years, the exclusive wholesale distributors of Bates Australia’s ‘BATES’ leather and ‘WINTEC’ synthetic saddles and other products in the United Kingdom and in the United States, respectively.[3]

   [1]Being, in the order of 86 per cent to 87 per cent of sales and gross profit of the plaintiffs’ business at the relevant times in the United Kingdom and the United States.

   [2]The defendant is referred to by its trading name, Bates Australia, in the balance of these reasons.

   [3]Referred to as ‘Bates’ (not BATES) and ‘Wintec’ (not WINTEC) in the balance of these reasons.

1. There were no signed written agreements between the plaintiffs and Bates Australia.  The parties agree that:

(a)        from about 1995 there was a distribution agreement between Weatherbeeta UK and Bates Australia in respect of wholesale distribution in the United Kingdom (UK Agreement); and

(b)        from about 1998 there was a distribution agreement between Weatherbeeta USA and Bates Australia in respect of wholesale distribution in the United States (USA Agreement);

(collectively, the Distribution Agreements).

1. On 28 October 2016, Bates Australia gave written notice to Weatherbeeta UK and Weatherbeeta USA that it was terminating the Distribution Agreements on six months’ notice and advised that the notice period would commence on 1 November 2016 and end on 30 April 2017 (Notice Period).

1. The claims and counterclaims in this proceeding relate to:

(a)        the existence or otherwise of particular alleged terms of the Distribution Agreements;

(b)        whether Bates Australia breached the Distribution Agreements by failing to give reasonable notice to Weatherbeeta UK and Weatherbeeta USA when terminating the Distribution Agreements;

(c)        the alleged breach by Weatherbeeta UK and Weatherbeeta USA of particular alleged terms of the Distribution Agreements; and

(d)       amounts claimed by Bates Australia in respect of outstanding invoices for products supplied to Weatherbeeta UK and Weatherbeeta USA.

1. The plaintiffs alleged that the Distribution Agreements each contained an implied term that it could only be terminated upon the giving of reasonable notice, and their primary pleaded allegation was that a reasonable notice period was three years.  In their Amended Statement of Claim filed on 14 September 2018 (Amended Claim),[4] the plaintiffs also made alternative allegations in relation to the length of a reasonable notice period, being notice periods of 30 months, 24 months, 18 months, or 12 months.  The plaintiffs alleged that Bates Australia breached and repudiated each of the Distribution Agreements by giving only six months’ notice, that each repudiation was accepted, and that they have suffered loss and damage as a result.

   [4]Filed shortly before the trial commenced.

1. The plaintiffs contended, among other things, that having regard to the circumstances existing at the time notice of termination was given with respect to each of the Distribution Agreements, it was not reasonably possible to obtain alternate comparable distribution rights in respect of synthetic and leather saddles and that it was therefore necessary to design, develop, manufacture, bring to market, and sell their own range.  It was submitted that the reasonable period of notice was to be ‘determined’ by the time taken to develop ‘their own in-house range’, and to get that range into their wholesale supply chain and to start to earn revenue from it.  In the plaintiffs’ written outline of closing submissions filed on 10 October 2018 (Plaintiffs’ Written Closing Submissions) that period was ultimately reduced from three years and submitted to be ‘a notice period of 27 months’.[5]

   [5]See, for example, the Plaintiffs’ Written Closing Submissions at [43]–[44], Section I ([136]–[152]), [153]–[209] (noting the reference to ‘a notice period of 27 to 29 months’ at [208]), and Transcript 922:6–13 and 915:9–13 (noting the reference to a period of 27 to 30 months at Transcript 922:8–13).

1. Bates Australia disagreed.  It alleged in its further amended defence and counterclaim filed on 21 September 2018 (Amended Defence and Counterclaim) that the Distribution Agreements each contained a ‘contrary express term’ allowing 180 days’ notice of termination to be given.[6]  In the alternative, it alleged that there was an implied term in each of the Distribution Agreements that it could be terminated upon the giving of reasonable notice and that the giving of six months’ notice was reasonable notice.[7]

   [6]See Amended Defence and Counterclaim at [9].

   [7]See Amended Defence and Counterclaim at [12]. Bates Australia did not press its pleaded estoppel defence in its Amended Defence and Counterclaim at [20]: see Bates Australia’s outline of opening submissions in response to claim filed on 27 September 2018 (Bates Australia’s Written Opening Submissions on Claim) at [43].

1. Bates Australia brought a counterclaim seeking damages, declarations, injunctions and other relief.  It alleged, among other things, that the Distribution Agreements contained particular terms and that Weatherbeeta UK breached the UK Agreement and Weatherbeeta USA breached the USA Agreement by: 

(a)        continuing to sell Bates Australia’s products after the termination of the Distribution Agreements;

(b)        failing to pay certain invoices for products supplied by Bates Australia; and

(c)        failing to establish, promote and extend, or use their best endeavours to promote, the sale of Bates Australia’s products in their respective territories. 

1. Bates Australia also alleged that Weatherbeeta USA breached a term of the USA Agreement by importing into and selling in the United States its own ‘COLLEGIATE’[8] brand of synthetic saddlery and accessories that competed with Bates Australia’s Wintec saddlery and accessories.

   [8]Referred to in the balance of these reasons as ‘Collegiate’ (not COLLEGIATE).

1. The plaintiffs admitted that there were terms of the Distribution Agreements to the effect that each would use its best endeavours to promote the sale of Bates Australia’s products in the United Kingdom and the United States and to the effect that each would establish, promote and extend the sale of Bates Australia’s products in the United Kingdom and the United States (collectively, Best Endeavours and Promotion Terms).  There was also no dispute between the parties regarding the payment terms.[9]  The plaintiffs denied the existence of the other terms alleged by Bates Australia and denied that any terms were breached, that Bates Australia suffered loss, or that it was entitled to damages or any of the declaratory, injunctive, or other relief claimed. 

   [9]See, for example, the parties’ agreed list of issues filed on 21 September 2018 (referred to below) at [H] of Part 2 of the agreed list of issues regarding the revised 60-day payment terms.

1. The plaintiffs admitted that certain invoices for products supplied by Bates Australia had not been paid, but contended that they were entitled to set off any amount owing in respect of those invoices, against the damages Bates Australia is alleged to be liable for as a result of its alleged breach of the Distribution Agreements by giving only six months’ notice of termination.

1. For the reasons that follow it has been concluded that:

(a)        The plaintiffs’ claims for a declaration that it was an implied term of each of the Distribution Agreements that they could be terminated upon the giving of reasonable notice have been established and succeed.

(b)        The plaintiffs’ claims should otherwise be dismissed.  Although it was an implied term of each of the Distribution Agreements that they could be terminated upon the giving of reasonable notice, neither of the plaintiffs established that, by giving six months’ notice to the plaintiffs, Bates Australia breached the Distribution Agreements.  Six months was reasonable notice.

(c)        Bates Australia’s counterclaim against the plaintiffs for a declaration that the Distribution Agreements were validly terminated by the giving of six months’ notice, and its claim against the plaintiffs relating to unpaid invoices for goods supplied to the plaintiffs, have each been established and succeed.

(d)       Bates Australia’s counterclaim should otherwise be dismissed.  Bates Australia has not established that either of the plaintiffs breached the Best Endeavours and Promotion Terms or that, if they had done, that loss was suffered as alleged.  It has also not established that there were other particular terms of the UK Agreement and the USA Agreement to the effect alleged and relied upon, or that, if there had been, that they were breached, or that loss was suffered as alleged.

A more detailed summary of conclusions in relation to each of the Distribution Agreements appears later in these reasons.[10]

[10]See paragraphs 397 and 500 below.

1. A dictionary of some key terms appears at the end of the body of these reasons.[11]

   [11]Prior to Schedule A and B, which also form part of the reasons.

BACKGROUND

1. Before turning to the many issues raised it is helpful to set out some background to the proceeding.[12]

   [12]Parts of which have been extracted from the Agreed Chronology filed by the parties (Agreed Chronology). 

1. Ron Bates (Mr Bates), Michael Bucknell (Mr M Bucknell) and Jim Kennard (Mr Kennard) were each involved in different ways in businesses associated with equestrian products and came to be close friends.  Mr M Bucknell had established and built up equestrian goods retail outlets which became known as Horseland.[13]  Mr Kennard had an equestrian wholesale business named Equestrian Supplies from which Horseland acquired products.  He also owned or part-owned an equestrian goods retail stores business in New South Wales known as Charlton Saddlery (now Charltons).  Mr Bates was involved with Bates Australia, a business started by his grandfather in Perth in 1934.  Bates Australia manufactures, supplies and distributes saddlery and accessories under two brands, Bates and Wintec.  The Bates products are manufactured from leather and the Wintec products are manufactured from synthetic materials. 

   [13]Mr M Bucknell had started with an equestrian goods retail store called Cobb & Co in about 1978 which was rebranded in the 1980s as Horseland along with a number of his other retail stores.  He then franchised some stores and by 1985 was operating four of his own stores and had franchised two further Horseland stores.  After the establishment of Weatherbeeta AU, new corporate stores within the Horseland network were owned and operated by Weatherbeeta AU.  Mr M Bucknell was the CEO and ran the Horseland network business on a day to day basis.  There are currently 22 franchises within the Horseland network in Australia located in Victoria, New South Wales, South Australia, Queensland, Tasmania and Western Australia.  See MB#1 at [16]–[36] – but noting, for the avoidance of doubt, that any witness statement paragraphs mentioned where part or the whole of the ‘evidence’ contained in  one or more of them was not read, or was ruled to be inadmissible, such evidence is not being referred to.  This also applies to any other references to witness statement paragraphs in these reasons.  Similarly, where evidence has been ruled or agreed to be admitted on a limited basis, any references in these reasons to such evidence are to the evidence on the basis so admitted.

1. In March 1986, Wintec’s predecessor ‘EQUITEX’ synthetic saddles were first launched in Australia by Bates Australia.

1. In 1986, Bates Australia instructed its then lawyers, Corser & Corser, to prepare what was described by Bates Australia as a standard form agreement for Bates Australia to use when entering distribution agreements with overseas distributors.  In 1986, Mr Bates travelled to Europe and appointed various distributors and provided some potential distributors with the standard form agreement.

1. In 1986, Bates Australia appointed an entity referred to as ‘Cottage Craft’ as the sole distributor of Wintec products in the United Kingdom.

1. From about 1986, Mr M Bucknell, Mr Kennard and Mr Bates explored establishing a wholesale company to distribute a range of equestrian products in Australia, including Wintec products.

1. In November 1986, Mr M Bucknell, Mr Kennard and Mr Bates incorporated a company named ‘Horseland Inc’ to distribute Wintec products wholesale in the United States, which it did from late 1986 to early 1988 utilising an external logistics provider for its warehousing.

1. In 1987, Weatherbeeta Pty Ltd (Weatherbeeta AU) was established by Mr Bates, Mr M Bucknell and Mr Kennard to conduct, among other things, an equestrian goods wholesaling business.  Weatherbeeta AU is and was more than 99.99 per cent owned by Alister Somerset Pty Ltd (Alister Somerset), with the remaining small percentage being owned by Mr M Bucknell.  Alister Somerset is owned as to one third by a company owned by Mr M Bucknell and Ms Joan Bucknell, one third by a company owned by Mr Bates and Ms Susan Bates, and one third by a company owned by Mr Kennard and another entity (which, in turn, is owned by Mr Kennard and other members of his family).[14]  In broad terms, the Weatherbeeta Group of companies (Weatherbeeta Group) is owned by the Bates, Bucknell and Kennard family interests in equal shares.

   [14]The corporate structure was reflected in the agreed ‘Weatherbeeta Company Chart’ comprising, among others, Weatherbeeta Limited (for the UK operations), Weatherbeeta Pty Ltd (for the Australian operations), and Weatherbeeta USA Inc and Alistair Somerset USA Inc (for the USA operations), and Weatherbeeta Ltd (for the New Zealand operations).  Mr Kennard’s wholesale business, Equestrian Supplies, was later acquired by the Group.

1. Mr Bates, Mr M Bucknell and Mr Kennard became directors of Weatherbeeta AU, with Mr M Bucknell being its Chief Executive Officer and responsible for the day to day operations of the company.  Mr M Bucknell, Mr Kennard and Mr Bates also each continued to run their own respective independent businesses, as well as being involved in the wholesaling business of Weatherbeeta AU. 

1. Weatherbeeta AU is the franchisor of the ‘Horseland’ network of equestrian goods retailers in Australia.  It wholesales equestrian goods to those stores, as well as to third party retailers.  Horseland stores have a large range of equestrian products and they also stock Bates and Wintec saddles at the retail level.  Weatherbeeta AU also became the wholesaler for Bates Australia’s products throughout Australia from about 1987, with Bates Australia’s stock being stored in Weatherbeeta AU’s warehouse facilities pending distribution to retailers.  Weatherbeeta AU charged a wholesale margin to Bates Australia for its distribution of Bates Australia’s products.

1. From 1988 Weatherbeeta AU appointed a company called ‘Equequip Ltd’ to supply Weatherbeeta horse rugs as well as a range of other equestrian products wholesale into the United Kingdom.  At that time Bates Australia had separate distribution arrangements in the United Kingdom for its Wintec saddles.

1. Following some operational challenges, including in relation to its warehousing arrangements, Horseland Inc ceased business in the United States in April 1988.  Mr M Bucknell, Mr Kennard and Mr Bates travelled to the United States where they met Mr Jack Levy (Mr Levy) and Mr Joe Miller (Mr Miller) of Millers Harness Company (Millers).  In mid-1988, Millers was appointed by Weatherbeeta AU to distribute Weatherbeeta horse rugs in the United States and by Bates Australia to be the sole distributor of Wintec saddles in the United States.  Millers was a once well-known equestrian store in Manhattan and one of the founders of Millers, Mr Miller, was said to have built Millers into the ‘equine epicentre of New York’.[15]  It sold saddlery, riding apparel and all kinds of equestrian equipment and was the largest equestrian goods wholesaler in the United States.  It had an expansive range of products and Mr Levy referred to it at one stage of having had about 24,000 products.[16]

   [15]According to the New York Times.  See Transcript 146:27 (Mr J Levy).

   [16]Transcript 147:18 (Mr J Levy).

1. Mr Bates said he believed he had provided to Mr Levy an unsigned distribution agreement for Bates Australia and Millers with a 120-day notice of termination clause and that he did so some time after a meeting with Mr Levy, Mr M Bucknell and Mr Kennard in 1988.  Mr Levy did not accept this and said that he had not seen it before and that there was no written agreement.[17]

   [17]See Bates Australia’s Written Closing Submissions at [39]–[42], Transcript 147:30–148:1, 19–21 (Mr J Levy), and JL#1 at [15]–[16].

1. In June 1989, Bates Australia terminated Cottage Craft’s distribution agreement for Wintec products in the United Kingdom by giving four months’ notice, which was later reduced to three months by negotiation.

1. In September 1989, Bates Australia appointed an entity referred to as ‘Hydrophane’ as its sole wholesale distributor of Wintec products in the United Kingdom in place of Cottage Craft.

1. During 1994, Mr Levy left Millers.

1. During mid-to-late 1994, discussions occurred between Mr M Bucknell, Mr Bates and Mr Kennard about setting up a new equestrian goods wholesale distribution business in the United Kingdom.

1. In November 1994, Bates Australia terminated the distribution agreement with Hydrophane by giving it six months’ notice.

1. In about early 1995, Mr M Bucknell, Mr Bates and Mr Kennard travelled to the United Kingdom to explore warehousing options for setting up an equestrian goods wholesaling business in the United Kingdom, including in respect of equestrian products Weatherbeeta AU was then supplying to Equequip in the United Kingdom.

1. In early 1995, Weatherbeeta UK was incorporated (as a wholly owned subsidiary of Alister Somerset) to become the wholesale distributor of Weatherbeeta horse rugs and other equestrian products in the United Kingdom and to take over the distribution in the United Kingdom of Bates Australia’s Wintec products from Hydrophane.

1. In or around May 1995, Weatherbeeta UK commenced distributing Wintec products as part of its equestrian product range as Bates Australia’s sole wholesale distributor of those products in the United Kingdom. 

1. Weatherbeeta UK subsequently commenced distributing the full range of Bates Australia’s Bates and Wintec saddles and other products in the United Kingdom as Bates Australia’s sole wholesale distributor.

1. There was no signed written agreement between Bates Australia and Weatherbeeta UK setting out the terms of the distribution agreement between them. 

1. Mr Bates, Mr M Bucknell and Mr Kennard were pleased with the success of Weatherbeeta UK’s wholesale equestrian products distribution business in the United Kingdom and in 1997 discussed the possibility of setting up an equestrian products wholesale distribution company in the United States that would also take over the wholesale distribution of Wintec products and Weatherbeeta rugs in the United States in place of Millers.  By that time Mr Bates, Mr M Bucknell and Mr Kennard were friends with Mr Levy, the former President of Millers.  By 1997, Mr Levy had left Millers and the new President was George Tauber (Mr Tauber).  In September 1997, Mr Tauber was informed that the distribution arrangements Millers had with Bates Australia and with Weatherbeeta AU were going to be terminated, and in September 1997 Mr Bates and Mr M Bucknell signed an agreement with Millers regarding the arrangements for the transition (Millers Transition Agreement).  The Millers Transition Agreement allowed for Millers to continue to distribute Wintec and Weatherbeeta AU products until 31 December 1998, a period of approximately 16 months.[18]  During this period, Roger Jackson (Mr Jackson) was appointed to work with Millers by the Weatherbeeta Group to gain experience in the United States before launching Weatherbeeta USA’s operations.  

   [18]MB#1 at [70]–[71].

1. In July 1997, Weatherbeeta USA was incorporated as a wholly owned subsidiary of Weatherbeeta AU and commenced selling equestrian products wholesale in the United States from about January 1999.  Weatherbeeta USA became the sole wholesale distributor for Bates Australia’s Wintec products from that time and also started distributing some other Bates Australia’s products, but not all products in the Bates range at that stage.  Products sold by the company included saddles, bridle wear, grooming products, saddle pads, and horse rugs under a variety of brands, including Weatherbeeta, Dublin, Carlyle, Bates and Wintec. 

1. There was no signed written agreement between Bates Australia and Weatherbeeta USA.

1. Mr Jackson was appointed Chief Operating Officer and President of Weatherbeeta USA in January 1998.

1. In about 1998, Weatherbeeta USA introduced as part of its approach to pricing a ‘Minimum Advertised Pricing’ (MAP) policy for the retailers it supplied wholesale goods to.  In the United States it was considered to be permissible to require a retailer not to advertise products below a certain price.  However, the sale price for any sale could not be regulated in this way and the seller was free to sell at whatever price they wished to.[19]

   [19]See, for example, JF#1 at [115] and DW#1 at [145].

1. In about March 2000, the credit trading terms for Weatherbeeta UK and Weatherbeeta USA for Bates and Wintec products were extended from 30 to 60 days.

1. Following discussions between Mr Bates, Mr M Bucknell and Mr Kennard, Weatherbeeta USA commenced distributing the full range of Bates and Wintec products in the United States from about mid-2001.

1. In mid-2001, Mr Bates agreed to Weatherbeeta USA taking over Bates Australia’s Canadian wholesale distribution of Wintec products and terminated its previous Canadian distributor, Cavalier Equestrian Inc. (Cavalier).  Six months’ notice was given to Cavalier.[20]  Mr Bates claimed that Weatherbeeta USA bought back Cavalier stock, but this was contested by Mr Jackson.[21] 

   [20]Bates Australia’s Written Closing Submissions at [58] and Transcript 542:12–14 (Mr Bates).

   [21]An evidentiary aspect arose regarding a document said to be a Cavalier invoice reflecting the purchase by Weatherbeeta USA of certain stock from Cavalier.  This is addressed in the ‘Other Matters’ section of these reasons.

1. In November 2001, Bates Australia extended the termination notice period for its Scandinavian distributor, Scan-Horse, from six months to 12 months (2001 Scan-Horse Agreement).

1. In 2002, Weatherbeeta USA acquired the rights to the ‘Collegiate’ brand from Millers.  In 2003/2004, the Weatherbeeta Group commenced selling leather saddles and accessories under the Collegiate brand (including Collegiate leather saddles made for it by Bates Australia and others), including in the United States.

1. In early 2004, Mr Bates’ daughter, Ms Ellen Bates (Ms Bates), commenced employment with Weatherbeeta UK in the position of sales team leader. 

1. On 28 October 2004, Mr Bates faxed to Mr M Bucknell a copy of the 2001 Scan-Horse Agreement.

1. In July 2005, Ms Julia Finch (Ms Finch) joined Bates Australia as its marketing manager.

1. In about 2005, Bates Australia terminated its exclusive distribution agreement in the Netherlands with its previous distributor, S&K Paardedekenfabrik, after it launched a leather saddle brand which Bates Australia considered competed with the Bates brand.  Bates Australia then appointed EKKIA[22] as its exclusive distributor in the Netherlands.[23]

   [22]Referred to in the balance of these reasons as ‘Ekkia’ (not EKKIA).

   [23]JF#1 at [144].

1. In 2008, an attempt was made to move into the equestrian retail trade by the Weatherbeeta Group.  Weatherbeeta USA opened a Horsatack retail store in the United States, and Weatherbeeta UK opened two Horsatack retail stores in the United Kingdom.

1. In November 2009, Ms Bates was appointed Country Manager of Weatherbeeta UK.

1. In 2010, Mr Jackson left his position with Weatherbeeta USA and became Network Development Manager of the Horseland network in Australia.

1. In 2010, Mr M Bucknell retired from the Weatherbeeta Group and his son, Mr Adam Bucknell (Mr A Bucknell), was appointed chief executive officer of the Weatherbeeta Group, which included Weatherbeeta USA and Weatherbeeta UK. 

1. In 2011 or early 2012, Weatherbeeta UK implemented what was known as the Dealership Program for Bates and Wintec saddles in the United Kingdom (Dealership Program).  Under the Dealership Program, new Bates and Wintec branded products were sold to ultimate purchasers in the UK through retail authorised dealers.  This required wholesale customers of Weatherbeeta UK (i.e. authorised dealers) to enter into a dealership agreement with Weatherbeeta UK and to agree to take on additional obligations, such as training their representatives and maintaining minimum stock and sales levels of Bates and Wintec saddles, in order to obtain supplies on particular commercial terms. 

1. In December 2011, the Weatherbeeta Group recommended New World Consultants (New World) to Bates Australia to advise Bates Australia regarding its business model.  In March 2012, New World were engaged by Bates Australia to advise on various matters, including Bates Australia’s business model in Australia, its arrangements with Weatherbeeta AU in Australia, and its business arrangements overseas.  New World recommended that Bates Australia should take over the wholesale distribution of its products in Australia from Weatherbeeta AU.[24]  

   [24]JF#1 at [165].

1. Mr A Bucknell, Mr Bates and others attended a Saddle Strategy Day in June 2013 facilitated by a consultant with New World.  New World’s recommendations from the Saddle Strategy Days were summarised in a document it prepared headed ‘A Win‑Win Concept for Weatherbeeta and Bates – The right physical changes’ that was provided to Bates Australia and Weatherbeeta AU.[25]

   [25]JF#1 at [169]; CB 2512; CB 2510–2511. 

1. During 2013, Weatherbeeta USA closed its Horsatack retail stores in the United States.  Weatherbeeta UK subsequently closed its Horsatack retail store in the United Kingdom.  

1. In July 2013, Doug Walker (Mr Walker) joined the Weatherbeeta Group as its Chief Marketing Officer.  This was a newly created position.

1. In late 2013, Mr Bates notified Mr A Bucknell that Bates Australia proposed to take over from Weatherbeeta AU the wholesaling of Bates and Wintec products in Australia.  Weatherbeeta AU was not pleased with this change and communications passed between Mr A Bucknell and Mr Bates, and the issue was raised by Mr A Bucknell with the Weatherbeeta AU board in Mr Bates’ absence.  In an email of 29 October 2013 to Mr Bates, Mr A Bucknell communicated the view that the concept of Bates Australia becoming a wholesaler to ‘Horseland and independents’ was something that ‘…we disagree with in principle, and would prefer the continuation of the existing arrangements…’.  The reasons for the change were referred to in a presentation provided to Mr A Bucknell, about which Mr A Bucknell and Mr Bates further communicated.  Bates Australia contends that at this time Mr A Bucknell became suspicious about what their intentions were.

1. In 2014, Ms Finch was appointed the General Manager of Bates Australia. 

1. Weatherbeeta UK and Weatherbeeta USA contended that during the period 2014 to 2016 Bates Australia experienced a leather shortage, quality issues and defects with Bates Australia’s products.  Issues of this kind did arise during this period, although there were differing views expressed at trial as to their nature and extent.  There were communications and issues between the parties including from about 2014 regarding these issues.

1. On 27 February 2014, at a meeting of the Weatherbeeta Group Advisory Committee, Mr Bates was asked to resign as a director of companies in the Weatherbeeta Group but did not do so.  Mr Bates said that when he did not agree to resign, Mr M Bucknell told him that he needed to consider himself ‘removed’.  Mr Bates said that since that meeting he has ‘been excluded’ by the other directors and executives from having any involvement in the running of those companies or in the decisions made by the boards of those companies.[26]  He said that his involvement since that time has been confined to attending some but not all general meetings as a shareholder.  Mr M Bucknell and the Weatherbeeta Group subsequently undertook steps to remove Mr Bates as a director of Weatherbeeta Group companies in or about late 2017 and early 2018.[27] 

   [26]The companies being Weatherbeeta AU, Weatherbeeta NZ, Weatherbeeta UK and Weatherbeeta USA.

   [27]Mr Bates said that he was removed as a director of various companies during the period November 2017 and March 2018.  See RB#1 at [37]–[41].

1. By letter dated 6 March 2014, Bates Australia confirmed that it was taking back the wholesale distribution of its products in Australia from Weatherbeeta AU with effect from 1 May 2014.  The letter recorded that the changeover ‘was originally proposed’ to be from 1 April 2014 but that there were ‘… some operational considerations that need[ed] to be taken into account for both companies’.

1. Mr A Bucknell responded by emails on 13, 18 and 19 March 2014 and, among other things, stated that everyone was ‘across’ what needed to happen and ‘committed to making it happen seamlessly…’. 

1. Bates Australia contended in its submissions that from about March 2014 the Weatherbeeta Group pursued a new strategy to extend their range of existing brands and to introduce new synthetic saddles to their Collegiate range.  This was said to be evidenced by, among other things, the evidence referred to in Annexure A to its written closing submissions, including statements contained in a document entitled ‘March 2014 trip notes’ that record Mr A Bucknell saying to a manufacturer for the plaintiffs, ‘[o]ur priority for saddle development has changed.  We now want to aggressively develop our saddle range in both leather and synthetic’.[28]

   [28]See Bates Australia’s Written Closing Submissions at [94]–[97] and the evidence there referred to.  See also Annexure A to Bates Australia’s Written Closing Submissions.

1. During the period November 2013 to December 2015, discussions took place between Bates Australia and Weatherbeeta Group regarding the possibility of entering into new formal written distribution agreements for the wholesale distribution of Bates and Wintec products in the United Kingdom and the United States.  This occurred in a context where Bates Australia considered it needed to put a ‘selective distribution agreement’ in place with some of its dealers.  This was occurring in connection with Bates Australia’s move to implement a retail dealer program similar to that which had been implemented in the United Kingdom.  By email, on 7 May 2014, Ms Finch provided Mr A Bucknell ‘for your information’ Bates Australia’s ‘New Distribution Contracts’ that were being sent out to all ‘major distributors’.  Among other things, the email referred to aspects of the documents, including that the ‘initial term’ proposed was now three years.[29]

   [29]Email from Ms Finch dated 7 May 2014 at CB 2669.

1. In the negotiations between Mr A Bucknell and Mr Bates regarding possible new and formal written agreements, the plaintiffs had been seeking a five-year initial term, but Bates Australia had referred only to a three-year term.[30]  Negotiations involved lawyers and the exchange of draft agreements with various mark ups.  The drafts from Bates Australia included allowing for a six-month notice of termination period at the end of an initial three-year term.  Initially a 12-month period of termination had been sought by Mr A Bucknell in connection with the initial term, although later drafts included a six-month notice period, but this was linked to a request for a five-year initial term.  Despite extensive negotiations and discussion, agreement was not reached regarding the initial term and other matters and ultimately no new agreements were entered into. 

   [30]There was a contested issue as to whether four years was mentioned at one point.

1. From December 2014, differences of view emerged between the plaintiffs and Bates Australia regarding marketing approach, advertising spend and related matters. Numerous communications passed between the parties.[31]

   [31]Matters in issue included, in particular, differences between Bates Australia’s Ms Finch and Weatherbeeta Group’s Chief Marketing Officer, Mr Walker — but also involving Mr A Bucknell and others.  These matters feature in connection with Bates Australia’s claim that the plaintiffs breached their best endeavours and promotion obligations and are addressed in more detail later in these reasons.

1. It appears that by late 2014 there was considered to be some adverse change in the nature of the relationship between the parties.[32]

   [32]See, for example, RJ#2 at [59] and JF#1 at [159] and [175]. See also DW#1 at [32]. It is also apparent from some of the communications in late 2014 and following.

1. The termination date for Weatherbeeta UK’s warehouse lease in the United Kingdom was 24 December 2015, but this was extended by a period of 12 months.

1. In about February 2016, Weatherbeeta AU launched two synthetic Collegiate saddles in Australia.  The plaintiffs contended that these were not saddles developed from scratch but were existing ‘off the shelf’ saddles made by SK International and also sold by Bates Australia’s distributor in France, Ekkia, that Weatherbeeta AU made some changes to and effectively re-branded.  

1. In March 2016, the then President of Weatherbeeta USA, Ms Michele Schnitzel, ceased to be in that role, and Mr Walker was subsequently appointed. 

1. On 10 March 2016, a meeting was held between Bates Australia and the plaintiffs regarding various matters and some issues that had arisen between them.[33]  The minutes of that meeting[34] and subsequent communications further evidenced differences of view regarding marketing approach and various other matters.

   [33]Referred to by Ms Finch in her evidence as a ‘crisis meeting’.

   [34]As annotated by Weatherbeeta USA.

1. In May 2016, Ms Bates tendered her letter of resignation to Weatherbeeta UK and informed Mr A Bucknell that she intended to go and work in the family business of Bates Australia.  Ms Bates worked out a notice period and ultimately left Weatherbeeta UK on about 9 September 2016. 

1. In about June 2016, Weatherbeeta UK entered into an 11-year lease in respect of new warehouse premises in Rushden in the United Kingdom for its equestrian goods wholesale distribution business in the United Kingdom (Rushden Lease).[35]

   [35]CB 3739.

1. By about July 2016, Bates Australia had decided to terminate the Distribution Agreements, although it was contentious at trial as to whether this decision was taken a little earlier.  Ms Finch and Mr Bates said it occurred in a strategy meeting in July 2016.[36]

   [36]The plaintiffs contended that the agenda for that meeting revealed that the decision had been made some time before that meeting, and that the agenda revealed it was to discuss how best to implement it.

1. In August 2016, Weatherbeeta USA launched the two synthetic Collegiate saddles[37] that had been launched in Australia, in the United States.

   [37]And some accessories.

1. In about August 2016, two new companies associated with Bates Australia were incorporated as the vehicles that were to become Bates Australia’s wholesale distributors in the United Kingdom and the United States.  They were Saddlery Brands International UK Limited (Bates UK) and Saddlery Brands International USA LLC (Bates USA).[38]

   [38]As noted below, Bates UK and Bates USA commenced wholesale distribution of Bates and Wintec products in the United Kingdom and the United States (respectively) in place of Weatherbeeta UK and Weatherbeeta USA.

1. On 24 August 2016, whilst still at Weatherbeeta UK, Ms Bates was appointed a director of Bates UK.[39]

   [39]Transcript 464:20–27 (Ms E Bates).

1. On 9 September 2016, Ms Bates finished with Weatherbeeta UK and in early October 2016 she joined Bates Group as a member of the management team.  She was subsequently appointed to her current positions as General Manager of Bates UK and President of Bates USA.[40]

   [40]Bates UK and Bates USA are the Bates Australia associated companies that took over the wholesale distribution of Bates and Wintec products from Weatherbeeta UK and Weatherbeeta USA.

1. On 20 October 2016, Mr A Bucknell met with Ms Bates at the ‘Pickled Ploughman’ pub in Adderbury, England.  Ms Bates informed Mr A Bucknell that Bates Australia would be terminating the UK Agreement and the USA Agreement.  A further meeting was held between them the following day at Weatherbeeta UK’s offices.

1. On 21 October 2016, Weatherbeeta UK and Weatherbeeta USA placed substantial orders for various Wintec and Bates products with Bates Australia (October 2016 Purchase Orders).[41] 

   [41]This action became the subject of submissions regarding why this was done.  See, for example, Bates Australia’s Written Closing Submissions at [98]–[106]. 

1. By letter dated 28 October 2016, Bates Australia gave written notice to Weatherbeeta UK that it was terminating the UK Agreement on six months’ notice (UK Termination Notice).  That letter read as follows:

Dear Adam,

It is with regret that I am writing to you on behalf of Bates Australia, to terminate our Distribution Agreement with Weatherbeeta Ltd.

As you are already aware this is a decision that has not been taken lightly and is based on the commercial reality of the current saddle market and the changes required to sustain the long-term future of our business.

Our arrangements with distributors is that after an initial period of 2 years, either party may terminate with 180 days’ notice.  We are exercising this right, with the intention that our sole distribution agreement in the UK terminate on 30 April 2017.

During the Notice Period (1st November 2016 to the 30th April 2017) Weatherbeeta UK must continue to act in accordance with our Distribution Agreement as the sole distributor of our products in the UK.  As such, unless otherwise agreed in writing you must (without limitation):

•    Use your best endeavours to establish, promote and extend the sale of the products within the territory

•    Not either directly or indirectly, manufacture or cause to be manufactured by a third party, sell or import for selling or in any other way have an interest in the manufacture or sale of equipment identical with or similar to our products.

As I am sure you would be aware, failure to adhere to these key obligations as our sole distributor in the UK is likely to cause us to suffer loss and damage and may constitute reasonable grounds for immediate termination.  We expressly reserve all rights to terminate the Distribution Agreement for breach of its terms irrespective of whether such breach occurred prior to or after the date of this notice.

Similarly we will continue to fulfil our obligations to you as our sole distributor during the notice period.

Yours sincerely,

Ron Bates
Managing Director

Bates Australia[42]

[42]CB 4122.

1. By letter dated 28 October 2016, Bates Australia also gave written notice to Weatherbeeta USA that it was terminating the USA Agreement on 180 days’ notice (USA Termination Notice).[43]  That letter was in relevantly identical terms to the UK Termination Letter.  

   [43]CB 4123.

1. On 28 October 2016, Bates Australia also sent a ‘side letter’ to Mr M Bucknell and Mr Kennard (Side Letter).  That letter read in part as follows:

Dear Mike & Jim,

It is with regret that I am writing to confirm that we are exercising our rights to terminate our sole distribution arrangement with Weatherbeeta in the USA and UK.  Please see the accompanying copies of the letters of notice.

Ellen has had two preliminary meetings with Adam last week in an effort to openly discuss our position.  I am using the opportunity to write to you both personally to explain the reasons behind our decision.

Decision to give notice:

The last few years we have been trying to find the right way to develop our business in each of our markets.  The equestrian market, and the saddle market

…

So, on conclusion of our July 2016 workshop we determined that in order to reverse the sales decline in these two important markets, the current distribution structure has to change, and unfortunately that is resulting in us giving notice to Weatherbeeta.

Ultimately in those two very challenging markets, the business model just isn’t right for the brands, Bates is at a cross roads, and we need to move to a business model that will enable growth.  I know this won’t be a complete surprise to you Mike following our conversation in June 2016, although the timing may be quicker than expected.  We had not anticipated that the revenues in both markets would continue to go backwards at such a rate this financial year, and we have had to take action.

I am hoping that between us we can reach an agreement to end the distribution arrangement on good terms.

Notice Period

As you know from when Weatherbeeta has taken over distributor territories in the past, the general notice period under our distribution agreement is 6 months.  Wanting to be fair and reasonable, we are offering Weatherbeeta 6 months’ notice in both markets from the 1st of November.

During the notice period Weatherbeeta would of course be obligated to fulfil all duties of an exclusive distributor – maintain stock levels, implement an agreed sales and marketing plan, and continue to act in the best interests of both of the brands, including not launching competitor products without agreement.

Should you be minded to accept a shorter notice period and work with us, we would be happy to discuss.

Steps forward from here

So far Adam’s approach has not been conducive to us achieving a smooth transition.  His response has been very negative, making allegations and threatening legal action.  Without going into the details we reject that there is any proper legal or factual basis for the matters he has raised to date.

I hope that we are able to have a reasonable dialogue to work through these issues on a commercial basis.  It is my intention to do everything possible to enable us to end our arrangement in the UK and USA on good terms.  I’m sure you would agree it is important for everyone to handle this professionally and amicably to ensure the ongoing goodwill of all of our customers.

There is also a bigger picture to consider here – our saddles still represent a large sales revenue for the Horseland group in Australia, and for Weatherbeeta in New Zealand, and it is in both our interests to try to maintain a good working relationship to protect that revenue.

Mike & Jim, please feel free to contact me if you would like to discuss and clarify any of these matters at any time.

Yours sincerely,

Ron Bates
Managing Director

Bates Australia[44]

[44]CB 4124–4125.

1. At about the time notice of termination was given, approximately 87 per cent of sales and gross profits of Weatherbeeta UK were derived from products other than Bates Australia’s products and approximately 86 per cent of Weatherbeeta USA sales and gross profit were derived from products other than Bates Australia’s products.[45]  The plaintiffs put it this way:  at the time Bates Australia gave notice of termination in October 2016, its products represented about 13.7 per cent of Weatherbeeta USA sales and 12.4 per cent of Weatherbeeta UK sales (based on 2015/2016 figures).  As a percentage of gross profit, Bates Australia’s products contributed 14.0 per cent in the USA and 12.8 per cent in the United Kingdom.[46]

   [45]See Bates Australia’s Written Closing Submissions at [143]; Plaintiffs’ Written Closing Submissions at [153] and the evidence there referred to.

   [46]See Plaintiffs’ Written Closing Submissions at [153] and the evidence there referred to.

1. On 15 November 2016, Mr A Bucknell sent an email to Bates Australia contending, among other things, that reasonable notice was required to be given and that a period of three years was reasonable notice.  He also stated that the plaintiffs ‘completely reject the assertion that Weatherbeeta is somehow bound by arrangements you have with other distributors.  Weatherbeeta has never agreed to any such terms …’, also stating that the agreement was not formal or in writing.  He also denied that there was any breach and stated that ‘… no notice of breach has ever been served on Weatherbeeta in the past 20 years’.  The commencement of legal proceedings was also referred to.[47]

   [47]Letter from Mr A Bucknell sent by email on 15 November 2016 at CB 4130A–C.

1. On 2 December 2016, Bates Australia sent a letter in response to Mr A Bucknell, attaching a copy of what was said in the Amended Defence and Counterclaim to be the standard form of distribution agreement.  The letter from Bates Australia asserted that there was an ‘express contractual right’ to terminate the Distribution Agreements by giving 180 days’ notice, that six months’ notice was reasonable anyway and referred to various matters now relied upon in this proceeding, including repurchasing stock.  In part, the letter was in the following terms:

Dear Adam,

In response to your communication sent by email on the 15th of November, your correspondence is based on a false premise, that our right to terminate the contract is based on us having an obligation to provide reasonable notice to Weatherbeeta.

By giving 180 days notice effective from 1 November 2016 we (Bates) have exercised our express contractual rights to terminate our Distribution Agreements in both the UK and the USA.

The relevant legal position is that at all material times it was an express term of the agreement between Bates and Weatherbeeta that Weatherbeeta was to be appointed to act as its exclusive distributor in relevant markets on the same terms as it contracted with its other distributors.

The basis of the contractual relationship between Bates and its distributors is set out in the attached pro-forma Distribution Agreement that was prepared in 1988. The terms of the Distribution Agreement clearly provide for an initial term of two years and thereafter each party being at liberty to terminate upon the provision of 6 months’ notice.

The discussions between the relevant directors leading to appointments in UK, USA and the addition of Canada are all consistent with a 6 month notice period to change distributors.

The exception that proves the rule is that in 2000 when the terms for payment were extended from 30 days to 60 days for Weatherbeeta USA.

If, contrary to our stated position you were successful in arguing that the parties entered into an agreement which did not contain any express provisions relating to termination (which we state is not the case) we consider it improbable that a court would conclude that in the circumstances described below the actual notice provided to you is unreasonable and that a notice period of more than 6 months is required. Further, there is no proper legal or factual basis to support your assertion that 3 years would be a reasonable notice period.

…

Yours sincerely

Ron Bates
Managing Director

Bates Australia[48]

[48]CB 4351B.

1. As is apparent, the letter stated that the basis of the contractual relationship between Bates Australia and its distributors was ‘as set out in the attached pro-forma Distribution Agreement that was prepared in 1988 …’ and that the terms clearly provide for an initial term of two years and thereafter each party being at liberty to terminate upon the provision of six months’ notice.  The terms set out in, and features of, that document are referred to in greater detail in Schedule B to these reasons (Schedule B).  As appeared to be common ground, on the evidence, December 2016 was the first time that this document had been provided to the plaintiffs.

1. The plaintiffs contend that it was not reasonably possible to obtain alternate comparable distributorships and that it was necessary to design, develop and bring to market their own new leather and synthetic saddle ranges to replace the Bates and Wintec saddles.  They say this process commenced in about December 2016.  Bates Australia disputed the history and timing and contended that development and planning commenced as early as 2014.[49] 

   [49]See Bates Australia’s Written Closing Submissions, including its Annexure A and the material there referred to, and oral closing submissions at Transcript 936 and following.

1. Mr Jackson said that shortly after receiving notice of termination he had a number of strategy discussions with Mr A Bucknell which resulted in him making the trip to India in December 2016 to meet with representatives of saddle manufacturers and speak with them about developing new moulds and saddle trees for a new range of Weatherbeeta saddles.

1. The new ranges were said to comprise three ranges or brands of leather saddles, being Crosby, Enzo Treviso, and a French inspired and designed range (French range) as well as a synthetic saddle range under the Collegiate brand.  The Crosby brand was acquired from Millers in the early 2000s and was previously distributed in the United States but not the United Kingdom.  This brand was to be positioned directly above the Collegiate leather saddle range already being distributed by Weatherbeeta UK and Weatherbeeta USA.  Enzo Treviso was the new Italian brand, and that was to sit above Crosby in terms of price and quality.  The French range was also to use French and Italian leathers and sit alongside Enzo Treviso in terms of price and quality.  Within these three ranges there was said to be 16 new models of leather saddles, but no synthetic saddles would be sold under these brands.

1. The synthetic range was to be sold under the Collegiate brand.  The Collegiate brand was to include nine leather saddles and six synthetic models.[50]

   [50]See RJ#1 at [182]–[187].

1. By email dated 8 January 2017, Bates Australia stated that the products ordered in the October 2016 Purchase Orders would increase inventory levels beyond that reasonably required to process orders up to the end of the Notice Period on 30 April 2017 and that it was in both parties’ interests to revise the orders.  Bates Australia ‘reserve[d] the right to amend and refuse any orders that increase inventory beyond levels reasonably required to process orders up to 30 April 2017’.[51]  Bates Australia refused to fill the October 2016 Purchase Orders.  Following further communications Bates Australia accepted revised orders that reduced materially the number of products ordered (Revised October 2016 Orders).  As a result there was some delay in the supply of the products to the plaintiffs.

   [51]CB 4252.

1. The amounts submitted to be owing by the plaintiffs to Bates Australia in respect of goods supplied but not paid for were USD$206,834 (plus interest) in respect of Weatherbeeta UK and USD$157,935 (plus interest) in respect of Weatherbeeta USA.[52]  All of the outstanding monies were said by Ms Finch to be ‘due for payment on or before 1 June 2017’.[53]

   [52]See Bates Australia’s Written Closing Submissions at [261] and [298], JF#1 at [347]–[350] and [364], and CB 4739–4804, noting that the amount submitted to be owing excludes an amount of 92 (US) cents referred to in JF#1 at [364].

   [53]See JF#1 at [347]–[350].

1. On 19 January 2017, Weatherbeeta UK and Weatherbeeta USA issued retailer updates to the market in the United Kingdom and the United States, which included reference to the end of the distribution Agreements with Bates Australia.  The retailer updates were in the following terms:

The WEATHERBEETA Group has the world’s leading portfolio of equestrian brands and has made significant strides over the last 3 years in developing Weatherbeeta, Dublin and Collegiate into even stronger brands that have global reach. The recent introductions of Weatherbeeta ComFiTec, Dublin Apparel & the exciting new Collegiate saddles and bridlework ranges have delivered excellent results and underline the success of our brand development strategy.

We have a very exciting year planned for 2017 with key introductions on those brands and indeed elsewhere on our portfolio.

We remain totally focused on servicing our retail customers; we aim to deliver programs that help grow their profit and to serve their business as simply and efficiently as we can.

Behind the scenes, we are constantly striving to make our business simpler and easier to do business with. And of course, we are always reviewing our range to ensure it is best suited to our retail partners.

After more than 20 years of success distributing Bates & Wintec products in the UK & USA, Bates Saddlery have informed WEATHERBEETA that they wish to develop a new business model for their saddle distribution in these territories and will be taking on the task of supplying customers directly effective May 2017.

WEATHERBEETA will make every effort to help our customers manage this transition in such a way that they can continue to trade profitably on those brands.

We would also like to put on record our appreciation of our customers’ support over many years on Bates and Wintec and wish them every success in their new relationships.

Should you have any questions or concerns, please feel free to contact your Account Manager.

Kindest Regards,

The WEATHERBEETA Group

1. In February 2017, the Weatherbeeta Group launched some new leather saddles under the Collegiate brand.

1. By letter dated 9 March 2017, Weatherbeeta UK and Weatherbeeta USA’s solicitors wrote to Bates Australia and stated, among other things, that Bates Australia was required to provide reasonable notice and that ‘… a notice period of three years is reasonable …’.  The letter also requested that the termination notices be withdrawn.  Bates Australia’s solicitors responded by letter dated 15 March 2017 and stated, among other things:  ‘To be totally clear, our client has exercised contractual rights to terminate the relevant distribution agreements and will not withdraw the termination notice’.

1. By letter dated 16 March 2017, Weatherbeeta UK and Weatherbeeta USA’s solicitors wrote to Bates Australia’s solicitors stating, among other things, that by reason of the purported termination on 180 days’ notice and the failure or refusal to withdraw the notice, Bates Australia had repudiated each of the Distribution Agreements and that this repudiation was accepted.  All rights were reserved.

1. On 17 March 2017, this proceeding was commenced by the plaintiffs.

1. Bates Australia alleged that 30 April 2017 was the date the termination of the Distribution Agreements took effect, being the end of the six months’ (1 November 2016 to 30 April 2017) notice of termination period referred to in the termination letters dated 28 October 2016.

1. From 1 May 2017, Bates UK and Bates USA have distributed Bates Australia’s products in the United Kingdom and the United States (respectively) in place of Weatherbeeta UK and Weatherbeeta USA.  Bates Australia does not supply saddles to Bates UK and Bates USA at a margin and makes no profit from either of them.  As Ms Finch put it:  ‘Bates Australia does not make a margin on saddles supplied to Bates UK or Bates USA and therefore does not make any revenue from supply to Bates UK and Bates USA’.[54]  At the time of hearing Bates UK and Bates USA had not made any profits or distributed any dividends to Bates Australia.[55]  There was no obligation or requirement for Bates UK or Bates USA to distribute dividends to Bates Australia.[56]

   [54]See JF#1 at [356].

   [55]See JF#1 at [355].

   [56]Transcript 544:12–16 (Mr Bates).

1. Subsequent to 30 April 2017, Weatherbeeta UK and Weatherbeeta USA was selling down its inventory of Bates and Wintec products and therefore continued to sell some of Bates Australia’s Bates and Wintec products in the United Kingdom and the United States.  Bates Australia contended that Weatherbeeta UK and Weatherbeeta USA breached the Distribution Agreements by continuing to sell Bates and Wintec products after 30 April 2017.

1. In June/July 2017, Weatherbeeta USA introduced to retail customers five Collegiate leather saddles, said to have been manufactured using an old saddle tree.[57]

   [57]See Transcript 192:6–9 (Mr Jackson).

1. On 31 July 2017, upon Bates Australia giving an undertaking as to damages, an interlocutory order was made by consent by Almond J in this proceeding restraining Weatherbeeta UK and Weatherbeeta USA from, among other things, continuing to sell remaining inventory of Bates and Wintec products until the hearing and determination of this proceeding.

1. In January/February 2018, Weatherbeeta UK introduced into the United Kingdom five Collegiate leather saddle models said to have been developed on an old saddle tree and three leather models developed on a newer saddle tree.[58]

   [58]See Transcript 192:21–193:8 (Mr Jackson).

1. In February 2018, the Weatherbeeta Group launched at its trade show in Australia a new range of synthetic saddles under the Collegiate brand manufactured using pre-existing moulds and saddle trees.[59]

   [59]See Agreed Chronology at [9].

1. Weatherbeeta UK and Weatherbeeta USA submitted that it was ‘critical’ to have ‘a saddle range to replace the Bates and Wintec range’ and contended that it was in about December 2016 that the development of new saddles comparable to Bates and Wintec products commenced,[60] and that this range ultimately was to comprise five Collegiate synthetic models from a new saddle tree, and leather Crosby, Enzo Treviso, and French inspired ranges, also from a newly developed saddle tree.

   [60]As opposed to Collegiate saddles that had been developed using a pre-existing or old saddle tree.

1. Weatherbeeta UK and Weatherbeeta USA say that in June/July 2018, they introduced the five Collegiate synthetic saddle models developed using the new saddle tree.[61]

   [61]See Transcript 192–196 (Mr R Jackson).

1. Weatherbeeta UK and Weatherbeeta USA say that the leather Crosby and Enzo Treviso saddle ranges made on the new saddle trees are expected to be in stock in early 2019.[62]

   [62]In light of this timeline, in the Plaintiffs’ Written Closing Submissions at [42], the plaintiffs contended that this ‘… meant a notice period of 27 months (i.e. until early 2019) was reasonable at the time notice of termination was given’.  That is, the period between 1 November 2016 and January 2019.

1. As earlier noted, Bates Australia contended that the development of the new saddle models commenced much earlier in time, in 2014, and before notice of termination was given in October 2016.[63]

   [63]See, for example, Bates Australia’s Written Closing Submissions at [262]–[272] and Annexure A thereto.

THE ISSUES

1. An agreed List of Issues was prepared by the parties having regard to the pleadings (List of Issues).  The List of Issues addressed issues in dispute and issues that were not in dispute.

Issues In Dispute

Some features of the pleaded claims, defences, counterclaim, and defence to counterclaim

1. In a shorthand way the issues in dispute recorded in the List of Issues draws heavily from the allegations, defined terms, and particulars in the pleadings.  Consequently, in order to properly understand the issues in dispute in the manner expressed and defined by the parties in the List of Issues, and given the numerous contentious contractual issues raised in the Amended Defence and Counterclaim, it is necessary to refer to and understand the manner in which the Distribution Agreements are pleaded in the Amended Defence and Counterclaim by Bates Australia, what the alleged terms are that it seeks to rely upon, how these terms are said to be reflected in an alleged standard form agreement, the way these terms are defined, and Bates Australia’s allegations of breach by Weatherbeeta UK and Weatherbeeta USA.

1. It will be recalled that in the Amended Claim the plaintiffs alleged that it was an implied term of each of the Distribution Agreements that they could be terminated upon the giving of reasonable notice.  The plaintiffs submitted that their primary case was that reasonable notice was three years, alternatively, 30 months, 24 months, 18 months or 12 months, and that Bates Australia breached the Distribution Agreements by giving six months’ notice of termination.

1. In its defence to the Amended Claim, Bates Australia:[64]

   [64]Bates Australia did not press its pleaded estoppel defence. See Bates Australia’s Outline of Opening Submissions at [43].

(a)        Admitted that Weatherbeeta UK and Weatherbeeta USA were sole distributors of Bates Australia products in the United Kingdom and the United States pursuant to distribution agreements made between the parties.

(b)        Alleged that the UK Agreement and the USA Agreement were partly written, partly oral, partly implied and partly to be inferred. 

(c)        Set out the particulars of the UK Agreement in the following terms:[65]

[65]Underline emphasis added.  See Schedule B for further detail of the alleged Standard Form Agreement.

The UK Distribution Agreement was partly written, partly oral, partly implied and partly to be inferred.

Insofar as it was in writing, it was contained in the standard form of distribution agreement as previously provided to Mr Adam Bucknell of Weatherbeeta Ltd by letter dated 2 December 2016 from the Defendant. This was the standard written form of distribution agreement used for the Defendant’s products by 1995 in its various overseas territories (including Cottage Craft in the United Kingdom in 1986, Cavalier in Canada in 1986, Pupier (later AKTIS) in Belgium in 1986, S & K Paardedekenfabrik in the Netherlands in 1986, Scan-Horse in Scandinavia in 1986, Waldhausen in Germany in 1986, Choplan in France in 1986, Ukal (later Ekkia) in France in 1989, Tattini in Italy in 1986, Western Shoppe in South Africa in 1989, Millers in the United States of America in 1989 and Hydrophane in the United Kingdom in 1992).

Insofar as it is oral, it was contained in discussions prior to and during 1995 between Ron Bates on behalf of the Defendant and Michael Bucknell, Geoff Sinclair and James (Jim) Kennard on behalf of Weatherbeeta Ltd to the effect that, upon the termination of the previous UK distributorship with Hydrophane, the new UK distribution would be on the same basis or on the same terms and conditions as for other distributors of the Defendant’s products, as set out above.

Insofar as it is implied, it is implied in fact and implied in law to give business efficacy to the arrangements between the parties.

Insofar as it is to be inferred, it is inferred from the parties’ conduct over the course of the UK Distribution Agreement.[66]

[66]Amended Defence and Counterclaim, particulars to [2](c).

(d)       Set out the particulars of the USA Agreement in similar but not identical terms as follows:[67]

[67]Underline emphasis added.  See Schedule B for further details of the alleged Standard Form Agreement.

The USA Distribution Agreement is partly written, partly oral, partly implied and partly to be inferred.

Insofar as it was in writing, it was contained in the standard form of distribution agreement as previously provided to Mr Adam Bucknell of Weatherbeeta Ltd by letter dated 2 December 2016 from the Defendant. This was the standard written form of distribution agreements used for the Defendant’s products by 1998 in its various overseas territories (including Cottage Craft in the United Kingdom in 1986, Cavalier in Canada in 1986, Pupier (later AKTIS) in Belgium in 1986, S & K Paardedekenfabrik in the Netherlands in 1986, Scan-Horse in Scandinavia in 1986, Waldhausen in Germany in 1986, Choplan in France in 1986, Ukal (later Ekkia) in France in 1989, Tattini in Italy in 1986, Western Shoppe in South Africa in 1989, Millers in the United States of America in 1989, Hydrophane in the United Kingdom in 1992 and the UK Distribution Agreement in 1995).

Insofar as it is oral, it was contained in discussions prior to and during 1998 between Ron Bates on behalf of the Defendant and Michael Bucknell, Geoff Sinclair and James Kennard on behalf of Weatherbeeta USA to the effect that, upon the termination of the previous USA distributorship with Millers, the new USA distribution would be on the same basis or on the same terms and conditions as for other distributors of the Defendant’s products, as set out above.

Insofar as it is implied, it is implied in fact and implied in law to give business efficacy to the arrangements between the parties.

Insofar as it is to be inferred, it is inferred from the parties’ conduct over the course of the USA Distribution Agreement.[68]

[68]Amended Defence and Counterclaim, particulars to [5](c).

(e)        Alleged that there was an express term to the effect that the Distribution Agreements could be terminated upon the giving of 180 days’ notice (6 months) in writing by either party (in relation to the UK Agreement, the UK Express Notice Term, and in relation to the USA Agreement, the USA Express Notice Term).  The particulars alleged that the term was ‘set out in Clause 3’ of the written UK Agreement and the written USA Agreement — each being a reference to clause 3 of the alleged standard form agreement (Standard Form Agreement).[69] 

[69]See the reference to the Standard Form Agreement in the particulars extracted above, being the ‘standard form agreement’ referred to and enclosed with the letter from Bates Australia to Mr A Bucknell dated 2 December 2016, details of which are set out in Schedule B to these reasons.

(f)         Alternatively, alleged that if the Court finds that the Distribution Agreements did not contain express notice terms as alleged, the Distribution Agreements contained an implied term that each of them could be terminated upon the giving of reasonable notice.

(g)        Contended that a notice period of six months was reasonable notice under the UK Agreement and the USA Agreement and that Bates Australia was entitled to and did validly terminate the Distribution Agreements by the notices given on 28 October 2016, with such terminations taking effect on and from 30 April 2017.

(h)        Stated that it will set off the amount of its counterclaim against any amount for which it may be liable to either of the plaintiffs under the claim.

1. In its counterclaim it was alleged by Bates Australia, among other things, that:

(a)        There were terms of the UK Agreement to the effect that:[70]

[70]The references to clause numbers are pleaded references to clause numbers of the alleged Standard Form Agreement.  See the particulars to paragraph 23 of the Amended Defence and Counterclaim.

(i)         Weatherbeeta UK would establish, promote and extend the sale of Bates Australia’s products in the United Kingdom (clause 2) (UK Promotion Term).

(ii)       Weatherbeeta UK would not sell Bates Australia’s products outside the United Kingdom (UK Territory Term).[71]

[71]Bates Australia informed the Court that it did not press its claim that this term was breached.  See Bates Australia’s Outline of Opening Submissions On the Counterclaim filed 24 September 2018 (Bates Australia’s Written Opening Submissions On Counterclaim) at [55.1].  See also the List of Issues at [P].  This was also apparent from the Amended Defence and Counterclaim as one of the amendments made in the Amended Defence and Counterclaim was to delete paragraph 29 that alleged a breach of the UK Territory Term.  Consequently it was not a live issue on the pleadings.

(iii)      Weatherbeeta UK would use its best endeavours to promote the sale of Bates Australia’s products within the United Kingdom (clause 5(a)) (UK Best Endeavours Term).

(iv)      Weatherbeeta UK would pay for the products ordered and accepted within 30 days (clause 7) (UK Payment Term).

(v)        The trademarks on Bates Australia’s products were the property of Bates Australia and any use of the trademark would be exclusively to the benefit of Bates Australia (clause 11) (UK Trademarks Term).

(vi)      Any termination of the agreement would extinguish all rights of Weatherbeeta UK under the agreement to act as a representative for Bates Australia in the United Kingdom or to use any trademarks or trade names in Bates Australia’s possession (clause 22(a)) (UK Extinguishment Term).

Except for the UK Territory Term, the terms were alleged to be express and in writing, alternatively implied or inferred.[72]  Insofar as they were in writing, they were alleged to be ‘contained in the clauses set out above’ in the alleged Standard Form Agreement.  In so far as they were to be implied or inferred, they were alleged to be implied in fact and implied in law to give business efficacy to the arrangements between the parties, or to be inferred from the parties’ conduct over the course of the UK Agreement.[73]

[72]The UK Territory Term was not alleged to be an express written term but only an implied or inferred term.

[73]The UK Territory Term was alleged to be implied or inferred on the same basis.  However, insofar as the UK Territory Term was alleged to be implied, it was also said to be ‘consistent with’ clauses 1, 2, 4, 5 and 22 and the schedule to the alleged Standard Form Agreement, and that the plaintiffs had knowledge that Bates Australia had divided up its overseas sales territories in Europe, including a separate distribution agreement with Waldhausen in Germany which was in place since 1986.

(b)        There were terms of the USA Agreement to the effect that:[74]

[74]See the particulars to paragraph 24 of the Amended Defence and Counterclaim. The references to clause numbers are pleaded references to clause numbers of the alleged Standard Form Agreement.

(i)         Weatherbeeta USA would establish, promote and extend the sale of Bates Australia’s products in the United States (clause 2) (USA Promotion Term).

(ii)       Weatherbeeta USA would use its best endeavours to promote the sale of Bates Australia’s products within the United States (clause 5(a)) (USA Best Endeavours Term).

(iii)      Weatherbeeta USA would not directly or indirectly manufacture, sell or import any equipment identical with or using material similar to Bates Australia’s products (clause 5(d)) (USA No Competing Products Term).

(iv)      Weatherbeeta USA would pay for the products ordered and accepted within 30 days (clause 7) (USA Payment Term).

(v)        The trademarks on Bates Australia’s products were the property of Bates Australia and any use of the trademark would be exclusively to the benefit of Bates Australia (clause 11) (USA Trademarks Term).

(vi)      Any termination of the agreement would extinguish all rights of Weatherbeeta USA under the agreement to act as a representative for Bates Australia in the United States or to use any trademarks or trade names in Bates Australia’s possession (clause 22(a)) (USA Extinguishment Term).

The terms were alleged to be express and in writing, as contained in the specified clauses of the alleged Standard Form Agreement.  Alternatively, they were alleged to be implied in fact or law to give business efficacy to the arrangements, or inferred from the parties’ conduct over the course of the USA Agreement.

(c)        In about August or September 2001 Bates Australia’s Bates products were launched in the United Kingdom and the United States and, accordingly, the UK Agreement and the USA Agreement were varied by agreement to include the Bates products as well as the Wintec products as products covered by the Distribution Agreements.

1. In the context of the dispute between the parties regarding the terms of the Distribution Agreements, it is important to note that the references to the specific clause numbers referred to above are expressly pleaded references by Bates Australia to the specific and particular clauses of the alleged Standard Form Agreement, further details of which are referred to in Schedule B for ease of reference.

1. Bates Australia also alleged that the plaintiffs breached the alleged terms in various ways, and these allegations are addressed in detail later in these reasons.[75]

   [75]Although Bates Australia informed the Court that it no longer pressed its claim that the alleged UK Territory Term was breached, there was no concession that the term did not exist.  See Bates Australia’s Written Opening Submissions On Counterclaim at [55.1] and the List of Issues at [P].

1. Bates Australia sought (among other things)[76] declarations that the Distribution Agreements were validly terminated upon six months’ or 180 days’ notice, declarations that the plaintiffs have breached certain clauses of the Distribution Agreements by continuing to sell Bates Australia’s products in the United Kingdom and the United States after the end of the Notice Period (being 30 April 2017), payment of a debt for outstanding invoices, and damages.  It also sought permanent injunctions against Weatherbeeta UK and Weatherbeeta USA restraining them from selling any of its Bates and Wintec branded products in the United Kingdom or the United States or otherwise acting in breach of the alleged UK Extinguishment Term and the UK Trademarks Term and their alleged equivalents under the USA Agreement.

   [76]See paragraphs A to H of the Amended Defence and Counterclaim’s prayer for relief.

1. Weatherbeeta UK and Weatherbeeta USA admitted that there were terms of their respective Distribution Agreements to the effect that each would establish, promote and extend the sale of Bates Australia’s products in the United Kingdom and the United States, and that each would use its best endeavours to promote the sale of Bates Australia’s products in the United Kingdom and the United States.  They denied the existence of any agreement based on the alleged Standard Form Agreement and the existence of the other terms alleged by Bates Australia.[77]  They also denied that any such terms were breached, that Bates Australia suffered loss, or that it is entitled to damages or any of the declaratory, injunctive, or other relief claimed. 

   [77]There was no issue between the parties regarding payment terms.  This was reflected in the section of the List of Issues that addressed matters not in dispute.

1. Mr Walker’s stated belief that every competent marketer, including himself, should be challenging the level and type of investment in marketing in order to deliver a better return on investment and, in addition, that management had an obligation to the board to show that the marketing spend was effective in generating results.  In his experience he said that Ms Schnitzel in the United States and Ms Bates in the United Kingdom were appropriately and rigorously tested and engaged with in relation to their marketing spend when he was present.

1. Evidence reflecting substantive engaged communication between the parties regarding marketing, planning sales and promotion during that period — albeit with evident differences of view regarding various matters.  The evidence also revealed the exchange of various documents and email communications during the period and substantive engagement on the topics, although Ms Finch did not consider these to be acceptable marketing plans.[869]

   [869]For example, the communications referred to in the evidence of Ms Finch and Mr Walker, examples of which are also referred to in this Schedule.

1. Ms Schnitzel being replaced as President of Weatherbeeta USA by Mr Walker and Ms Bates resigning on 30 May 2016 and leaving in September 2016 to head up Bates UK and Bates USA, and some evidence regarding aspects of staff turnover experienced by the plaintiffs, communications with Bates Australia regarding these matters, and the plaintiffs seeking to improve their structure; refine efficiency; and regarding the making of new appointments in the sales, marketing and customer service areas.

1. The launch by Weatherbeeta USA of the two synthetic Collegiate saddles (that had been launched in Australia in February 2016) in the United States in August 2016, and the genesis and history leading to that launch — and the differences of view as to whether Weatherbeeta USA was entitled to sell such products, whether they compared to or competed with Wintec saddles,[870] and whether there was any impact on Bates Australia. Documents in which this launch was referred to included a document headed ‘Collegiate synthetic early partner program AETA August 2016’.[871] 

   [870]See, for example, RJ#1 at [208], [220]–[221]; RJ#2 at [66]–[70] and [108]; AB#2 at [30]; JF#1 at [61]–[65]; Transcript 221:6–17 (Mr Jackson); Transcript 351:20–352:15, 375:3–376:28, 391:21–31, 399:7–400:3 (Mr A Bucknell); Transcript 674:29–676:20 (Mr Bates); Transcript 506:21–508:29 (Ms Finch).

   [871]CB 3891.  The saddles were known as the Collegiate Bicton All Purpose synthetic saddle and the Collegiate Hartpury synthetic dressage saddle.  The wholesale price of the Bicton was recorded in documents as $240, with the MSRP being $400 and the MAP being $379.95.  The pricing for the Hartpury was a wholesale price of $300, an MSRP of $500, and a MAP of $479.95.

1. The time period experienced between launch of a wholesale product and being ready for sale to retailers.

1. Price increases in relation to Bates Australia products in about August 2016 and their amounts, and spreadsheets said by Mr A Bucknell to evidence price increases imposed across the board in relation to over 1500 products,[872] including Bates and Wintec products.[873]

   [872]Referred to in the industry as SKUs.

   [873]CB 4530–1, 4576.  See also the evidence referred to in Annexure A to Bates Australia’s Written Closing Submissions and the evidence of Mr A Bucknell regarding price increases in his witness statement at AB#2 at [8] and oral evidence at Transcript 355:24–366:31.

1. Further email communications in September 2016 evidencing further substantive engagement between the parties, including in relation to rebate claims and calculations, and communications between Ms Finch and Mr Walker as to spend reconciliations, the character of the brand advertising, and whether it should be eligible for a rebate.  An example comprised Ms Bates’ email of 7 September 2016,[874] which addressed, among other things, the rebate claims; sponsored riders in the United Kingdom; matters associated with the discussions in meetings and referred to in brand plans sent to Bates Australia; cashback offers on Wintec and various advertising in print and digital; proposing to reduce margins further by offering a trade incentive of ‘buy two and get one half price’; and seeking Bates Australia’s support in relation to a cashback offer.

   [874]Whilst she was still employed by Weatherbeeta UK.  CB 3974–3976.  Ongoing communications appear at CB 3966–3973.

1. Bates Australia making the decision to terminate the Distribution Agreements, incorporating Bates USA and Bates UK in July 2016, and appointing Ms Bates as a director of Bates UK whilst she was still working with Weatherbeeta UK in circumstances where, at that stage, the decision to terminate the Distribution Agreements had not been communicated to the plaintiffs.

1. Further substantive engagement with Bates Australia in relation to warranty issues arising with respect to saddles manufactured in 2014 and issues associated with saddles made from Italian leather from 2015 to 2016.  For example, this was the subject of an email from Ms Finch on 14 October 2016 following a telephone call the previous day regarding these issues, with the email including apologies from Bates Australia for the ongoing issues.[875]

   [875]CB 4047–4052.

1. The provision to Bates Australia of 2016/2017 operational plans by Mr Walker under cover of an email dated 19 October 2016.[876]  This email attached a re-worked planning document for the 2016/2017 operational plan, noted that aspects of marketing spend had been redirected in line with requests, referred to recent discussions, and invited questions.  It further shared an announcement made by Mr Walker on the combined United Kingdom and United States management structure regarding various appointments, also noting other aspects regarding United Kingdom and United States marketing contacts.  The appointments referred to included Ms Lynne Westwood as Commercial Support Manager for the United Kingdom and the United States covering sales operations and customer service; Ms Rana Meier being appointed Group Brand Manager for both the United Kingdom and the United States, noting the intention to share and pool best practice across both markets wherever it could be done, and seeing an opportunity in marketing; Ms Jessica Manson being appointed Sales Director for Weatherbeeta USA; and certain other appointments — and again inviting questions.[877] 

   [876]CB 4053–4071.

   [877]CB 4053.

1. The operational plans sent to Bates Australia with the 19 October 2016 email addressed numerous matters, including trade survey data, key brands/category issues and responses, key plan building blocks, a summary of marketing spend by general ledger code, and media plan detail.[878]  Key building blocks were noted in various quarters of the year, including promotion of Wintec gifts with purchase, execution of that promotion, story re-launch for Bates leather in the third quarter, and a focus in the fourth quarter of execution and sell-out for both brands.  It also revealed a review of marketing spend and the various areas spending was proposed for each of Bates and Wintec, including:  advertising print; advertising online; point of sale retail; sponsorship national; sponsorship riders; local area marketing; product promotions; local office recoveries; publishers and outlets and months in which funds were to be spent.  It also addressed the next steps, including feedback from Bates Australia and obtaining confirmation from Bates regarding its response to quality issues including reimbursements and returns, and additional expenses.[879]

   [878]CB 4054–4071.

   [879]CB 4071.

1. Bates Australia indicated in response that it would revert to them the following week, although this did not occur until about six weeks later, just before Christmas in 2016.[880] 

   [880]CB 4227–4230.

1. Mr Jackson confirming during cross-examination that budgeting occurred and money was spent in the 2016/2017 year in the United States.[881]

   [881]See Transcript 292:8–31.

1. Ms Bates informing Mr A Bucknell on 28 October 2016 that Bates Australia would be terminating the Distribution Agreements, and the sending of the UK Termination Notice,[882] the USA Termination Notice,[883] and the Side Letter on 28 October 2016,[884] followed by Mr A Bucknell’s response dated 15 November 2016[885] and Bates Australia’s letter in response dated 2 December 2016.[886]  Bates Australia stated in each of the Termination Notices that the decision to terminate the Distribution Agreements was ‘… a decision that has not been taken lightly and is based on the commercial reality of the current saddle market and the changes required to sustain the long term future of our business’.[887]

   [882]CB 4122.

   [883]CB 4123.

   [884]CB 4124–4125.

   [885]CB 4130A–4130C.

   [886]CB 4224–4226.

   [887]CB 4122, 4123.

1. Reference in communications from Ms Finch of 16 December 2016 to the marketing plan provided by Weatherbeeta USA for the 2016/2017 year as communicated to Bates Australia in October 2016 — and Ms Finch’s apology for the delay in response to the proposed plan.  The email also sought further information behind two of the slides and further evidenced some of the ongoing tension and differences of view.[888] 

   [888]CB 4227.

1. Ms Bates, as Country Manager for Weatherbeeta UK until she left in September 2016 to join Bates UK, having remained committed to her role and having not de-prioritised in any way the sale and promotion of Bates Australia’s products in the United Kingdom.  In her resignation letter dated 30 May 2016, she stated that, having been with Weatherbeeta UK for 12 years, she believed her notice period was 12 weeks but was prepared to extend this up to six months to allow a smooth transition to a replacement.  She also stated that she could ‘assure’ Mr A Bucknell that ‘… Weatherbeeta will have my 100% commitment until the very last day …’.

1. The placing of the October 2016 Purchase Orders, Bates Australia’s refusal to supply the product quantities ordered, and the subsequent reduction in the number of products ordered as requested by Bates Australia.  The receipt of the order was confirmed on 21 October 2016[889] and referred to in a negative way in Ms Finch’s email to Ms Bates of 26 October 2016.[890]  Further communications also followed in relation to the order with Ms Finch asking for it to be queried.[891]

   [889]CB 4109.

   [890]In which she also observed that if the plaintiffs were ‘… prepared to send knee-jerk reaction orders in the value of $USD450,000 then our offer of £75,000 over and above what they will expect regarding stock buyback and marketing spend is unlikely to be well received …’.  CB 4109.

   [891]CB 4117–4119.

1. The delay in supply by Bates Australia to the plaintiffs of the products the subject of the orders.

1. Attempts by Mr A Bucknell to obtain alternate saddle supply including attempts to arrange a meeting with Pedro Ruizdiaz in South America regarding alternate supply and the non-engaging response being characterised by Mr A Bucknell as the company having ‘… blown us off again …’.[892]

   [892]CB 4670–4672; see also CB 4672–4678.

1. The plaintiffs’ release of the ‘retailer update’ on 19 January 2017 referring to, among other things, the notice given by Bates Australia terminating the Distribution Agreements with effect from the start of May 2017, the advances made over the last three years in developing Weatherbeeta, Dublin and Collegiate into stronger brands, and referring to the exciting new Collegiate saddles and bridle work ranges delivering excellent results and underlining the success of the Weatherbeeta Group’s brand development strategy.[893]

   [893]CB 1925–6.

1. Ms Finch informing Mr A Bucknell by email on 19 January 2017 that, following receipt of a number of emails from stores, Bates Australia understood Weatherbeeta had communicated the distribution changes externally and ‘… as such we have now started our communicate [sic] to the Trade.  Content of our communication includes:  That the changes will be effective from 1^st May, that Weatherbeeta have been a valued distribution partner in the relevant markets and will continue to be so until 30^th April’.[894]

   [894]CB 4271.

1. Weatherbeeta USA’s MAP policy, its terms,[895] and differences of views between the parties regarding Weatherbeeta USA’s approach to the policy subsequent to notice of termination being given — and a document recording advertised pricing by various retailers advertising products below MAP as at 25 May 2017.[896]

   [895]CB 2773.

   [896]CB 4282–4493.

1. Differences of view between Bates Australia and the plaintiffs regarding the impact and benefit of the Dealership Program in the United Kingdom and, in this context, details of the sales and profit figures for the United Kingdom in respect of the years 2007/2008 to 2016/2017 (and for the United States in respect of the years 2012/2013–2016/2017 — although not relating to a dealership program as this did not exist in the United States).[897]

   [897]As referred to in the statements of Mr A Bucknell (and others) and appearing at CB 4699.

1. The development by the Weatherbeeta Group of a new saddle range on new saddle trees, why it was said to be necessary, and what was said to have occurred — and the differences of view regarding timing.[898]  The evidence included the evidence of Mr Jackson regarding his involvement, and the process not being commenced until late 2016 after the receipt of the Notices of Termination and the evidence referred to in Annexure A to Bates Australia’s Written Closing Submissions.[899]

   [898]In substance, the plaintiffs’ position was that it did not commence until after notice of termination was given, and Bates Australia’s position was that it commenced from some time in 2014 and that it impeded the plaintiffs’ ability to promote and sell Bates Australia products or use its best endeavours so to do. 

   [899]Relied upon by Bates Australia in support of its contention that the process commenced earlier.

1. The timing and release and proposed timing and release of saddles by the plaintiffs, including Collegiate saddles made on old saddle trees and those developed using a new saddle tree and released subsequent to the end of the Distribution Agreements.[900]

   [900]Referred to the reasons above when addressing reasonable notice; the evidence of Mr Jackson (including at Transcript 192–196); the Plaintiffs’ Written Closing Submissions at [183]–[184] and [191]–[209]; and the Agreed Chronology.

1. Mr Jackson’s communications with Marcella at Ruizdiaz on 7 February 2017 suggesting he visit them in relation to future saddle supply, and noting that any future relationship would no longer be restricted by the Bates and Wintec relationship.[901]

   [901]CB 4304–4306.

1. Exchanges of correspondence between lawyers, including regarding the plaintiffs’ claimed set off in relation to outstanding invoices[902] and correspondence exchanged between solicitors dated 9 March 2017,[903] 15 March 2017,[904] and 16 March 2017,[905] with the plaintiffs stating through their solicitors that the purported termination of the Distribution Agreements on 180 days’ notice and the failure or refusal to withdraw the notices of termination amounted to a repudiation of the agreements, and that their clients accepted the repudiations and terminated the Distribution Agreements from that date.

   [902]For example, see CB 4494.

   [903]CB 4348A–B.

   [904]CB 4351A–4351D.

   [905]CB 4372.

1. Communications regarding aged stock reports, including between Mr Bates and Mr A Bucknell on 14 March 2017 regarding, among other things, an aged stock report and facilitating Bates Australia to ‘… enable us to come back to you with a proposal on the transition of the stock’.[906]

   [906]CB 4349, 4391–4392, 4409, including those at CB 4436, 4478, 4479.

1. The sale by Weatherbeeta UK of some Bates Australia products including in and around April 2017 in the United Kingdom to parties who were not ‘authorised dealers’, and differences of view regarding the permissibility and impact of the sales.

1. Communications from Weatherbeeta UK to a German online company dated 16 March 2017 referring to the termination of the Distribution Agreements and that Bates Australia was launching a new wholesale distribution model in May 2017.[907]

   [907]The letter referred to possible confusion, noting that they wanted the retailer to have the opportunity to ‘stock up and be prepared for the busiest sales period this season, so that you don’t run out of stock later’.  In order to support retailers the letter indicated that Weatherbeeta UK had ‘prepared some fantastic offers’ and enclosed an application form and order form including saddles and prices that were currently available.  CB 4352–4367.  However, it will be recalled that Bates Australia did not press any claim regarding sales outside of the United Kingdom, or any claim that there was a breach of the alleged UK Territory Term.

1. The sale by the plaintiffs of Bates and Wintec products subsequent to the end of the notice period, and invoices and related evidence regarding sales made by the plaintiffs after 30 April 2017.[908]  Bates Australia’s view was that this sale was impermissible, whereas the plaintiffs were of the view that they were entitled to sell the remaining stock.  The parties also had differences in view regarding the impact of this sale.

   [908]See, for example, CB 4403–4404, 4406–4407, 4410, 4417–4426 (regarding equestrianclearance.com), 4518.

1. Correspondence between the parties regarding sale of remaining inventory of products subsequent to the end of the Distribution Agreements, and the consent orders made by Justice Almond on Bates Australia’s interlocutory injunction application restraining the plaintiff from, inter alia, promoting or selling Bates Australia products until trial or further order.[909]

   [909]MFI-14 and CB 4624AA.

1. Bates Australia’s alleged loss and differences of view between the parties regarding the suffering of loss and quantum.

SCHEDULE B

Alleged Standard Form Agreement

The terms and features of the alleged standard form agreement that Bates Australia sent to the plaintiffs on 2 December 2016:

1.The cover page of the document:

(a)makes provision for parties to insert date with the ‘DATED _________________________ 1988’ printed at the top of the page;

(b)names ‘CARBINE NOMINEES PTY LTD t/a BATES SADDLERY CONSOLIDATED of the one part’ and makes provision for the name of the contracted party to be inserted with ‘and _________________________ of the other part’ printed underneath the words ‘of the one part’;

(c)has the heading ‘DISTRIBUTION AGREEMENT’ printed in the centre of the page; and

(d)has the words ‘CORSER & CORSER, SOLICITORS, PERTH.’ printed at the bottom of the page.

2.The agreement is formal in its structure and terms having been prepared by Bates Australia’s then solicitors, Corser & Corser.  It contains 28 separate written clauses and a schedule dealing with five items, being:  date of contract; product; time, manner and currency of payment; territory; and special conditions (the Agreement Schedule).

3.‘Date of contract’ in item 1 of the Agreement Schedule is blank.  ‘Products’ in item 2 of the Agreement Schedule are listed as ‘“Wintec” Riding Saddles and Accessories’.  ‘Time, Manner and Currency of Payment’ in item 3 of the Schedule provides ‘Payment by Irrevocable Documentary Letter of Credit drawn 30 days after despatch of goods in Australian dollars’.  ‘Territory’ in item 4 of the Agreement Schedule is blank and ‘Special Conditions’ in item  5 of the Agreement Schedule records the position as ‘none’.

4.Appointment is dealt with in clause 2 and records appointment of ‘the Distributor’ as the ‘Sole Distributor’ and its agreement to act as such ‘to establish promote and extend the sale of the products’ of Carbine Nominees Pty Ltd supplied under the brand name of Wintec in the territory.

5.Clause 3 is headed ‘Period’ and provides as follows:

This Agreement shall commence on the date set out in Item 1 of the Schedule and shall continue for a period of two (2) calendar years and thereafter from year to year until terminated by one hundred and eighty (180) days notice in writing given by either party hereto to the other and subject to the power of summary determination by [Carbine Nominees Pty Ltd] hereinafter contained.

6.Carbine Nominees Pty Ltd’s obligations are referred to in clause 4, which addresses matters such as provision of product, information regarding production and sales programs, and the furnishing of catalogues and printed matter as should be necessary or appropriate for the Distributor’s marketing activities.  ‘Such matters should be joint decisions between the Distributor and [Carbine Nominees Pty Ltd]’.

7.Clause 5 is headed ‘General Obligations of the Distributor’ and provides as follows:

The Distributor shall:-

(a)use its best endeavours to promote the sale of the products within the territory;

(b)mutually agree that marketing costs shall be paid as reviewed from time to time;

(c)at the request of the Company furnish information regarding landed costs, re-sale prices and any other market conditions of the products that the Company deems relevant;

(d)not either directly or indirectly, manufacture or cause to be manufactured by a third party, sell or import for selling or in any other way have an interest in the manufacture or sale of equipment identical with or similarly constructed using materials similar to the products;

(e)not co-operate with any third party regarding the technology of the products; and

(f)not assign the benefit of this Agreement without the Company’s prior written consent.

8.Supply of products and orders is dealt with in clause 6.

9.Pricing is dealt with in clause 7.  As to pricing, the clause provides that Carbine Nominees Pty Ltd ‘shall quote all prices to the Distributor at its best FOB terms in the currency specified in Item 3 of the Agreement Schedule and the Distributor shall pay for the products ordered and accepted within the time and in the manner specified in Item 3 of the Agreement Schedule’.  As stated, item 3 of the Agreement Schedule provides for ‘Payment by Irrevocable Documentary Letter of Credit drawn 30 days after despatch of goods in Australian dollars’.

10.Engagement of sub-agents by the Distributor is addressed in clause 8 and ‘Secrecy’ and confidentiality is addressed in clause 9.

11.Unfair competition and infringement of industrial property rights is addressed in clause 10.

12.Trademarks are referred to in clause 11.  That clause provides as follows:

All trademarks on the products are the property of the Company.  The Distributor shall sell the products under the Company’s trademark strictly in accordance with instructions.  The use of the trademark shall ensure exclusively to the benefit of the Company.  The Distributor may not change any colour or marking on the products without the Company’s prior written consent.

13.Maintaining a number of stock units for demonstration purposes and maintaining stock levels equivalent to three months’ average sales is addressed in clause 12, with after sales service and repairs being addressed in clause 13.

14.Clause 14 deals with fees and taxes providing for the Distributor to pay a range of fees and taxes ‘without recourse’ to Carbine Nominees Pty Ltd.

15.Clause 15 deals with retention of title and provides that Carbine Nominees Pty Ltd ‘… shall retain ownership of the products sold to the Distributor or any substitute therefor so long as the purchase price or any part thereof remains unpaid’.

16.Sales targets and sales reports are dealt with in clauses 16 and 17.  As to the latter, the Distributor shall keep Carbine Nominees Pty Ltd informed of its sales activities and market conditions in the territory and shall each calendar quarter give an inventory report and sales forecast in the standard form of the following 12 months. 

17.‘[M]inimum quotas’ are referred to in clause 16, which provides as follows:

The minimum quotas for the Company’s sales to the Distributor shall be defined separately.  If the Distributor does not reach the specified sales targets during a period of twelve (12) consecutive calendar months, the Company shall have the right to terminate the Distributor’s representation by giving the Distributor ninety (90) days notice to this effect.

18.Improvements made by the Distributor or suggested by a third party to the Distributor are addressed in clause 18, and retention of property and copyright in documents is addressed in clause 19.

19.Clause 20 is headed ‘Premature Termination’ and provides for termination by ‘notice of immediate effect for any breach of same which has not been cured within thirty (30) days after notice has been given to the party in default or for any cause sufficient to justify termination with immediate effect under the proper law of this Agreement’.  Clause 21 provides for termination without notice in certain circumstances, including liquidation.

20.Clause 22 is headed ‘Effect of Termination’ and provides as follows:

Any termination of this Agreement shall:-

(a)extinguish all rights of the Distributor under the Agreement to act as representative for the Company in the territory or to use any trademarks or trade names in the Company’s possession; and

(b)oblige the Distributor to return to the Company immediately all documents supplied by the Company and all copies thereof in the agent’s possession, power or custody and to procure the return of all copies in the possession, power or custody of any sub-agent or any other third party to which the Distributor has handed over such documents.  Except when this Agreement is terminated because of a breach by either party, no compensation shall be payable for loss of profit, goodwill, creation of new clientele, severance pay or any other ground whatsoever in consequence of termination or failure to renew this Agreement.

21.Notices, force majeure and proper law are addressed in clauses 23, 24 and 25 respectively.

22.Arbitration is addressed in clause 26 and provides for ‘[a]ll disputes arising in connection with this Agreement’ being finally settled under the rules of conciliation and arbitration of the United Nations Commission on International Trade Law with the proceedings to take place in Perth in the English language. 

23.Clause 27 addresses the Distributor’s right to purchase from other suppliers and is in the following terms:

Where it shall be established to the reasonable satisfaction of the Company that the products are not competitive with other similar products or other manufacture in the territory, then the Distributor shall be at liberty with the prior consent of the Company given in writing to engage upon the sale of similar products obtained from other suppliers PROVIDED ALWAYS that the Company reserves the right to withdraw its consent at any time on giving thirty (30) days notice in writing to that effect.

24.Clause 28 is a ‘No Partnership or Agency Created’ clause.

25.The blank execution clauses are formal in structure contemplating the application of the common seal of Carbine Nominees Pty Ltd in the presence of a director and secretary and the same position in relation to the Distributor.