Legal Research
Cases
Watson & Son Ltd v Active Manuka Honey Association

Watson & Son Ltd v Active Manuka Honey Association

Link copied

Case Copied 15 December 2009 20 min read

Contents

On this page

IN THE COURT OF APPEAL OF NEW ZEALAND
CA469/2009
CA470/2009
[2009] NZCA 595
BETWEENWATSON & SON LIMITED

Appellant

ANDACTIVE MANUKA HONEY ASSOCIATION

Respondent

Hearing:22 October 2009

Court:Arnold, Randerson and Allan JJ
Counsel:T J Cooley and K J Scott for Appellant

S S Cook for Respondent

Judgment:15 December 2009 at 3 pm

JUDGMENT OF THE COURT

A            The appeal and cross-appeal are both dismissed.
B            Costs are to be fixed in accordance with [46] of this judgment.
____________________________________________________________________
REASONS OF THE COURT
(Given by Randerson J)
Introduction
[1]        This appeal and cross-appeal form part of ongoing litigation between the parties over trademark and associated labelling issues in connection with the sale of manuka honey. The case is concerned with costs issues arising from two sets of interlocutory injunction proceedings already determined between the parties. In particular, it raises issues about the scope and application of a provision for indemnity costs contained in a licence agreement between the parties which has since been cancelled.
[2]        As a result of research undertaken at the University of Waikato, it was discovered that New Zealand manuka honey contained an active ingredient with antibacterial properties. A laboratory test to assess the level of the antibacterial activity was developed. The level of that activity is expressed as a unique manuka factor (UMF) with a corresponding number e.g. UMF 15.
[3]        The respondent, the Active Manuka Honey Association (the Association), was incorporated by a group of manuka honey producers and is the holder of the trademark UMF which has been registered in New Zealand and a number of other countries. The Association has licensed a number of parties to use the trademark in consideration of the payment of licence fees and product levies. The appellant, Watson & Son Limited (Watson), was one of those licensees until its licence was terminated on 21 December 2008.
[4]        The licence agreement contained elaborate provisions for the testing and labelling of honey sold under the licence. As a result of a routine audit undertaken in November 2007, the Association asserted that Watson was selling honey which was not true to label. In particular, the Association alleged that the level of antibacterial activity in the product was below that indicated on the label. Further testing during 2008 did not resolve the issue and the Association took steps to terminate the licence.
The litigation
[5] Watson issued proceedings against the Association on 27 October 2008 seeking, amongst other things, an interim injunction to restrain the Association from terminating the licence agreement. Panckhurst J declined the interim injunction in a decision delivered on 5 December 2008. This Court promptly dismissed Watson’s appeal from Panckhurst J’s decision on 19 December 2008: [2008] NZCA 566.
[6]        On the same day, Watson advised it was withdrawing from membership of the Association. Then, on 21 December 2008, the Association advised Watson that it was treating Watson’s actions as a repudiation of the licence agreement. The Association advised Watson that the licence was terminated with immediate effect and requested…

Grounds of appeal

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

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

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

Consideration

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

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

Keep reading for free

Create a free CaseChat account to read Watson & Son Ltd v Active Manuka Honey Association and more:

Read every judgment in full
Ask AI and get answers linked to paragraphs
See how each paragraph was cited in later cases
Download judgments as PDF or Word

Continue with Google

One click creates your free account or signs you in.

By continuing you agree to the Terms and Privacy Policy.

Details

Case: [2009] NZCA 595
Decision Date: 15 December 2009

CaseChat Overview and Summary

The appeal and cross-appeal were heard by Arnold, Randerson, and Allan JJ in the Court of Appeal of New Zealand. The appeal was brought by Watson & Son Limited against a decision of Panckhurst J awarding indemnity costs to the Active Manuka Honey Association, while the cross-appeal was brought by the Association against a decision of Wild J refusing to award indemnity costs. The case revolves around the interpretation and application of an indemnity clause in a licence agreement between the parties. The Association had terminated Watson's licence, and Watson was using a different testing method and label for its manuka honey products. The Association sought and obtained interim injunctions against Watson for trademark infringement, passing off, and breaches of the Fair Trading Act.

The main legal issue was whether the indemnity clause in the licence agreement applied to cover legal costs incurred by the Association in the proceedings between the parties. Clause 16.2 of the licence agreement stated that the licensee indemnifies the Association against all actions and damages that may result from the licensee's operations in relation to the products. Panckhurst J had found that the clause applied and awarded indemnity costs, while Wild J had refused to award such costs in the separate interlocutory proceedings. The appeal and cross-appeal were dismissed by the Court of Appeal.

The Court of Appeal found that the indemnity clause in the licence agreement was broad and unambiguous, and it applied to legal costs incurred by the Association in relation to actions and damages falling within the scope of the clause. The clause was to be interpreted in its factual matrix and in accordance with ordinary principles of construction. The Court of Appeal concluded that the Association was entitled to indemnity costs in opposing Watson's appeal against the costs award, although the recovery should be reduced to 80% of the Association's costs to reflect its failure on the cross-appeal.

Orders