FEDERAL COURT OF AUSTRALIA Gold Peg International Pty Ltd v Kovan Engineering (Aust) Pty Ltd [2002] FCA 910 GOLD PEG INTERNATIONAL PTY LTD v KOVAN ENGINEERING (AUST) PTY LTD and OTHERS V 429 OF 2002 SUNDBERG J 18 JULY 2002 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 429 OF 2002 BETWEEN: GOLD PEG INTERNATIONAL PTY LTD (ACN 005 302 376) APPLICANT AND: KOVAN ENGINEERING (AUST) LTD (ACN 006 395 464) and OTHERS RESPONDENTS JUDGE: SUNDBERG J DATE: 18 JULY 2002 PLACE: MELBOURNE EX‑TEMPORE REASONS FOR JUDGMENT 1 The applicant seeks orders restraining the respondents until the hearing of the proceeding or further order, from (a) reproducing or substantially reproducing the Rota Therm drawings referred to in paragraph 11 of the statement of claim including in a three-dimensional form, or authorising such conduct, and (b) making, promoting, offering for sale, and/or selling machines utilising the cooker system referred to in paragraph 29 of the affidavit of Janis Zakis or authorising such conduct. 2 Having regard to the form of relief now sought as opposed to that foreshadowed in the application, the central plank of the applicant's case is the agreement alleged in paragraph 12 of the statement of claim. Related paragraphs are paragraphs 13, 14 and 21 to 24. The agreement is described as one under which Gold Peg engaged Kovan to manufacture the "Rota Therm cooker". The agreement is said to be partly in writing, partly oral, and partly to be implied, and to have seven specific terms. Insofar as it is in writing it is said to be contained in Gold Peg's purchase orders for parts, Kovan's quotes and invoices for each part manufactured for Gold Peg, correspondence between the parties from 17 June 1998 to 12 June 2002, and minutes of the proceedings of four meetings between representatives of the parties held between November 2001 and April 2002. 3 Insofar as the agreement is oral it is said to be constituted by conversations between Robert Smith of Gold Peg and Janis Zakis and John Miller of Kovan in June 1998, between Janelle Donnelly of Gold Peg and Janis Zakis on 19 April 2001, and between the representatives of the parties at the meetings the subject of the minutes to which I have referred. Insofar as the agreement is to be implied, it is said to be implied from the course of dealings between the parties deposed to in Mr Smith's affidavit of 5 July 2002 and in order to give business efficacy to those dealings. Most of the documents relied on are exhibits to Mr Smith's affidavit. There is no doubt that the documents show the existence of a business relationship between the parties that seems for some years to have been a satisfactory working relationship but which became unsettled, acrimonious and bitter during 2001, and collapsed in mid-2002. 4 But the documents do not disclose the existence of an agreement containing the terms pleaded with sufficient clarity or certainty to justify the grant of the relief sought. In this respect I am not satisfied that the applicant has shown a serious question to be tried. The purchase orders and Kovan's quotes and invoices disclose no more than that Gold Peg commissioned Kovan to supply parts and that Kovan performed the work. The 18 pieces of correspondence do not support the agreement pleaded. Seven of them relate to unsuccessful negotiations about the possible takeover of Kovan by Gold Peg, and throw no light at all on the agreement pleaded. 5 Other letters contain statements as to the parties' respective wishes as to an ideal arrangement between them, complaints by Gold Peg about Kovan's conduct that it contends is unacceptable, points for discussion at a forthcoming meeting about a future agreement, discussion points for a supply agreement to become effective on signing by both parties (no such agreement was ever signed) and statements that the existing ad hoc arrangements between the parties are unsatisfactory. There is a series of letters between April and June 2002 after it had become clear that the meetings and negotiations had not resolved the parties' differences, in the course of which they terminated their previous distribution arrangements. These do no more than show that the relationship between the parties had broken down. They do not establish that the relationship had the characteristics of the agreement pleaded. 6 The minutes of meetings do not assist Gold Peg. Those relating to the 29 November 2001 meeting record that the purposes of that and future meetings included reaching a conclusion on the form of an agreement. They also record that purchase order terms and conditions need to be sorted out and mutually agreed. The minutes relating to the meeting of 11 December 2001 throw no light on the matter. Those relating to the final two meetings are concerned with the takeover proposal and are likewise unhelpful. By the time of the last meeting on 10 April 2002 the parties' relationship had broken down altogether. 7 In saying what I have about the documents to which I have referred I am not suggesting they are irrelevant or that all of them are irrelevant; rather that in the absence of other evidence they fall well short of establishing a serious question as to whether the agreement alleged existed. 8 The evidence as to the conversations at the meetings does not extend beyond what is recorded in the minutes. What happened at the June 1998 meeting is recorded in a letter of 17 June 1998, one of the letters to which I have referred. It merely records the parties' respective wishes as to a possible future agreement. The letter concludes with Mr Smith saying "These are [the] initial basis (sic) for discussion re an agreement between GP and Kovan". In his affidavit, speaking of the period during which the letter was written, he says that during 1998 Gold Peg and Kovan commenced discussions to try to formalise their ongoing commercial relationship in a written agreement. 9 The conversation on 19 April 2001 is deposed to by Ms Donnelly. She says that Mr Zakis suggested that Gold Peg and Kovan initiate a joint venture relationship with a new company owned by both parties as the vehicle. Mr Zakis is alleged to have said that if Gold Peg agreed to Kovan being its exclusive supplier, he would acknowledge that Gold Peg owned the intellectual property. Ms Donnelly said Gold Peg would not allow Kovan to be its sole supplier. In my view this is merely a record of a bargaining exercise. 10 In his affidavit, Mr Smith baldly asserts the existence of an agreement containing the pleaded terms, but as I have said, the documents and conversations that are relied on to support it do not do so with sufficient clarity to demonstrate that a serious question to be tried exists in that respect. I have not referred so far to Kovan's answering material. This merely confirms my views about the status of Gold Peg's case on the agreement. In particular, Mr Zakis disputes the essential terms of the agreement asserted by Mr Smith. For the foregoing reasons I do not propose to grant the interim relief sought. 11 The applicant must pay the respondent's costs of the application. Those costs when taxed to be paid forthwith. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Sundberg. Associate: Dated: 23 July 2002 Counsel for the Applicant: C D Golvan Solicitors for the Applicant: Middletons Lawyers Counsel for the Respondents: D Collins SC with K Kemp Solicitors for the Respondents: Brian Ward and Partners Date of Hearing: 17 July 2002 Date of Judgment: 18 July 2002