FEDERAL COURT OF AUSTRALIA Cheviot Bridge Pty Ltd v Tyrrells' Vineyards Pty Ltd [2004] FCA 1253 CHEVIOT BRIDGE PTY LIMITED v TYRRELL'S VINEYARDS PTY LIMITED V 618 of 2004 JACOBSON J 23 SEPTEMBER 2004 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY V 618 of 2004 BETWEEN: CHEVIOT BRIDGE PTY LTD APPLICANT AND: TYRRELL'S VINEYARDS PTY LTD RESPONDENT JUDGE: JACOBSON J DATE OF ORDER: 23 SEPTEMBER 2004 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The parties have leave to issue within 7 days notices for discovery in accordance with Order 15 Rule 1, but not relating to representations alleged (as made in Statement of Claim). Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY V 618 of 2004 BETWEEN: CHEVIOT BRIDGE PTY LTD APPLICANT AND: TYRRELL'S VINEYARDS PTY LTD RESPONDENT JUDGE: JACOBSON J DATE: 23 SEPTEMBER 2004 PLACE: SYDNEY REASONS FOR JUDGMENT 1 This matter comes before me for directions today. It has been transferred to the New South Wales Registry from the Victorian Registry and is in my list for the first time. 2 There was a debate about directions and Mr Muddle, who appears for the applicant, sought an order for discovery which would embrace discovery of documents relating to a breach of the restraint of trade clause contained in clause 9.1 of the Asset Sale Agreement. This clause of the agreement is pleaded in [31] of the statement of claim. 3 Mr Angyal, who appears for the respondent, resists discovery. He says that [31] to [33] of the statement of claim do not disclose a reasonable cause of action. He has tendered a copy of the Asset Sale Agreement, contained in the 'Transaction Bible' which is exhibit SB-3 referred to in the Affidavit of Ms Bennett dated 8 July 2004. Mr Angyal has drawn attention to the whole of the provisions of clause 9 which provides as follows: - "9 Restraint of Trade 9.1 Restraint of Trade The Seller agrees with and represents and undertakes to the Buyer that, subject to clause 93, the Seller will not (and will ensure that no person corporation, trust, estate, association, partnership, firm or other body or individual controlled by or on behalf of the Seller will) directly or indirectly within Australia for a period of 18 months from the Completion Date: (a) undertake, carry on or beengaged in or concerned with or in any way economically interested in any Competing Business; (b) canvass or solicit any person who or which at any time during the 12 months immediately preceding the Completion Date is or was a client or customer of the Seller, with respect to any Competing Business; (c) be a lender to or guarantor for any person, firm or company which is engaged in any Competing Business; or (d) counsel, procure or otherwise assist any person to do any of the acts referred to in any of the above sub-paragraphs of this clause. 9.2 No Share Entitlements The Seller agrees with and represents and undertakes to the Purchaser that, subject to clause 93, it will not for a period of 18 months have a relevant interest (within the meaning of sections 608 and 609 of the Corporations Act) in securities in any body corporate going any of the things referred to in clause 8.1 within Australia. 9.3 Exceptions to Restraint Notwithstanding anything to the contrary in clauses 9.1 and 9.2, the Seller will not be in breach of clauses 9.1 or 9.2 by reason of: (a) The sale of no more than 20,000 cases per annum of Red or White wine in total under and by reference to the brand "Twin Wells"; (b) The sale of wines to the on premise market under and by reference to the brands "Glenbawn", "Moors Creek" and Tyrrell's Premium Brut"; (c) The sale by any retailer of the Seller's wine below $9.95, where that price is solely attributable to the retailer's independent pricing strategy and not to any conduct of the Seller; (d) The bottling, production and distribution by the Seller of wines in circumstances where the Seller acts as a contractor on behalf of a third party which is not a Related Entity of the Seller, (e) The ownership by the Seller of shares in any listed public entity which may engage in a Competing Business provided that the Seller must have not more than 10% of the Voting Power in that entity; and The production of wine by the Seller for sale in the export market. 9.4 Severance If any part or any provision or part of a provision of clauses 9.1 and 9.2 shall be held or found to be void, invalid or otherwise unenforceable, it shall be deemed to be severed to the extent that it is void or to the extent of voidability, invalidity or unenforceability but the remainder of the clause concerned shall remain in full force and effect. 9.5 Receipt of legal advice The Seller warrants that it has received independent legal advice with respect to the provisions of this clause and considers them to go no further than reasonably necessary to protect the goodwill associated with the Business and the Assets." 4 The respondent has pleaded in its defence the terms of clause 9.3(c) of the Asset Sale Agreement, which I have set out above. Mr Angyal submits that clause 9 must be read as a whole and that it is necessary to read clause 9.1 with clause 9.3(c). 5 He draws attention in particular to the opening words of clause 9.3 and contends that the applicant is bound to plead in terms of clause 9.3(c) that the sales, which constitute the alleged breach pleaded in [33] of the statement of claim were not solely attributable to the retailers independent pricing strategy. He says that it is incumbent upon the applicant to plead the negative in order to make out a cause of action for breach of clause 9. 6 There was no formal motion before me today but the parties have been content to argue this question which Mr Angyal says is purely a pleading point. 7 However, Mr Muddle submits that the effect of Mr Angyal's argument is really to seek summary judgment on the cause of action pleaded in [31] to [33]. He says that it is well established by the authorities that the court would not entertain summary judgment on such an issue where the claim cannot be said to be hopeless and in particular where the issue depends upon the knowledge of the respondent. 8 He says that upon the basis of what has been pleaded in [31] to [33], it would have been open to him to seek preliminary discovery on that issue. It does seem to me that as a matter of construction, the exception contained in clause 9.3(c) must be read with clause 9.1. That is to say, clearly enough, the clause must be read as a whole. 9 However, that is an issue to be dealt with on the final hearing. I accept Mr Muddle's submission that at this stage of the proceeding, I ought not entertain an application to either strike out [31] to [33] or give summary judgment against the applicant on those paragraphs of the pleading without giving the applicant an opportunity to obtain discovery which would embrace documents relevant to the issue raised by clause 9.3(c). It follows that I will make an order for discovery in terms of paragraph 1 of the draft short minutes of order submitted by Mr Muddle. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson. Associate: Date: 28 September 2004 Counsel for the Applicant: Mr W Muddle Solicitor for the Applicant: Deacons Counsel for the Respondent: Mr R Angyal Solicitor for the Respondent: Sparke Helmore Date of Hearing: 23 September 2004 Date of Judgment: 23 September 2004