FEDERAL COURT OF AUSTRALIA Miller v JLCS Pty Ltd [2006] FCA 871 HAROLD MILLER and SAUL MILLER v JLCS PTY LTD and LIONEL MILLER and JOEL DISTILLER VID 367 OF 2005 SUNDBERG J MELBOURNE 7 JULY 2006 (RULING MADE 4 JULY 2006) IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 367 OF 2005 BETWEEN: HAROLD MILLER First Applicant and First Cross-Respondent SAUL MILLER Second Applicant and Second Cross-Respondent AND: JLCS PTY LTD First Respondent and First Cross-Claimant LIONEL MILLER Second Respondent and Second Cross-Claimant JOEL DISTILLER Third Respondent and Third Cross-Claimant JUDGE: SUNDBERG J DATE: 7 JULY 2006 (RULING MADE 4 JULY 2006) PLACE: MELBOURNE REASONS FOR RULING 1 On the first day of the trial in this proceeding, the respondents sought a grant of leave to amend their defence and cross-claim. 2 Paragraph 19 of the defence and cross-claim currently denies the allegation that the applicants are suffering loss and damage and will continue to do so unless the respondents are restrained from engaging in the conduct complained of, and asserts that the applicants' only rights are those granted under the licence pleaded in the defence and cross-claim, which is terminable at will. The proposed amendment seeks to add the words: "or on such notice as is determined by this Honourable Court". 3 Paragraph 31 currently says that the second and third respondents "revoke the licence effective immediately". The proposed amendment seeks to add the words: "or on such notice as is determined by this Honourable Court". 4 Paragraph E of the prayer for relief seeks an injunction restraining the applicants from using the mark "Squires Loft" and the menus obtained from the respondents pursuant to the licence. The proposed amendment seeks to add the words: "granted immediately or on such notice as this Honourable Court deems appropriate". 5 The applicants opposed the grant of leave to make the proposed amendments. 6 I refused to grant leave and said I would give reasons for doing so. What follows are those reasons. 7 The applicants relied on the decision of the Court of Appeal in Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438. 8 That case was not a pleading case. It was about the implication of terms in a contract. One question was whether a term should be implied in a distributorship agreement for an indefinite period that it was terminable on reasonable notice. A further question was whether if such a term was to be implied, six months was a reasonable period of notice. 9 The whole of the discussion of McHugh JA at 443-448, with whom Priestley JA agreed, was relied upon. However, the following passages sufficiently state the effect of the decision for the purpose of dealing with the applicants' submissions opposing the proposed amendments. At 444, McHugh JA said: "Whether a contract is terminable on reasonable notice instead of at will also depends upon the existence of an implied term …. That question is determined by the circumstances existing as at the date of the contract …. However, the reasonableness of the period of notice depends upon the circumstances existing when the notice is given …. When a contract is terminable on reasonable notice, the period of notice must be sufficiently long to enable to recipient to deploy his labour and equipment in alternative employment, to carry out his commitments, to bring current negotiations to fruition and to wind up the association in a business-like manner." Then at 448 his Honour said: "the relevance of expenditure of money or effort cannot be confined to cases where the expenditure of effort occurs in the initial stages of the contract. If, during the contract, a party, acting within the scope of the agreement, engages in extraordinary expenditure or effort, that factor must be taken into account in determining the reasonableness of any notice given …. On the other hand, recurrent expenditure or effort not being of an extraordinary nature would not seem relevant to the reasonableness of the notice period. … The chief purpose of a notice for a reasonable period, therefore, is to enable the parties to bring to an end in an orderly way a relationship which, ex hypothesi, has existed for a reasonable period so that they will have a reasonable opportunity to enter into alternative arrangements and to wind up matters which arise out of their relationship. Matters to be wound up will include carrying out existing commitments, bringing current negotiations to fruition and, where appropriate, obtaining the fruits of any extraordinary expenditure or effort carried out within the scope of the agreement. The line between ordinary recurrent expenditure and effort and extraordinary expenditure and effort will not always be easy to draw. But in general it will be determined by what the parties would reasonably have contemplated was extraordinary effort or expenditure." 10 It was put by counsel for the applicants that the proposed amendments, if they were allowed to be made at this late stage, would require the applicants to put on considerable affidavit evidence as to those matters discussed by McHugh JA in Crawford Fitting as quoted above. To date, no such evidence had been put on. Therefore, the trial could not proceed if that had to be done. 11 It was also put that the proposed amendments, in effect, sought from the Court an advisory opinion on the duration of any notice period in circumstances where no such notice had been given. 12 Both complaints were well-founded. Therefore, I refused to grant leave. 13 In any case, O 11 r 2 of the Rules of Court provides that a pleading shall contain only a statement of the material facts on which a party relies. Paragraphs 19 and 31 currently do that. The proposed amendments would not comply with the rule. The fact that when the Court delivers judgment, it may be held that the licence can be terminated on such reasonable notice as the Court determines cannot be a material fact for the purpose of the rule. The proposed amendment to para E of the prayer for relief is consequential on the proposed amendments to paras 19 and 31. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Sundberg. Associate: Dated: 7 July 2006 Counsel for the Applicants: Mr I Jones Solicitor for the Applicants: Middletons Counsel for the Respondents: Mr M Goldblatt Solicitor for the Respondents: Goldsmiths Date of Ruling: 4 July 2006 Date of Reasons for Ruling: 7 July 2006