TCS ACES Pty Limited v Mikohn Gaming Australasia Pty Limited [2007] NSWSC 988

New South Wales Supreme Court

CITATION : TCS ACES Pty Limited v Mikohn Gaming Australasia Pty Limited [2007] NSWSC 988

HEARING DATE(S) : 30 August 2007 JURISDICTION : Equity Division Duty List

JUDGMENT OF : Brereton J

EX TEMPORE JUDGMENT DATE : 31 August 2007

DECISION : Interlocutory injunction granted restraining defendant from alienating benefit of licence agreement

CATCHWORDS : CONTRACTS – implied terms – duty to facilitate performance – implied negative obligation to refrain from doing anything to deprive other party of benefit of contract – where distributor entitled to remuneration calculated by reference to licence fees derived by principal from product placed by distributor – where principal proposes to assign benefit of licence agreements - INJUNCTIONS – interlocutory injunction – where principal threatens to alienate benefit of licence agreements to third party in breach of implied negative stipulation – whether damages a sufficient remedy

CASES CITED : Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438

PARTIES : TCS ACES Pty Limited (plaintiff) Mikohn Gaming Australasia Pty Limited (defendant)

FILE NUMBER(S) : SC 50138/07

COUNSEL : Mr N A Cotman SC (plaintiff) Ms K J Williams (defendant)

SOLICITORS : Ebsworth & Ebsworth (plaintiff) Deacons (defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION DUTY LIST

BRERETON J

Friday, 31 August 2007

50138/07 TCS ACES Pty Limited v Mikohn Gaming Australasia Pty Limited JUDGMENT (ex tempore) 1 HIS HONOUR: The defendant Mikohn Gaming Australasia Pty Limited is a wholly owned subsidiary of Progressive Gaming International Corporation Inc (PGIC), a leading supplier of integrated casino and jackpot management solutions for the gaming industry worldwide. By a Distribution and Service Agreement dated 10 April 2003, Mikohn appointed the plaintiff TCS ACES Pty Limited to be exclusive distributor in a territory which included Australia, New Zealand and various other countries in the Asia-Pacific region of Mikohn's range of progressive, bonus and non-progressive table games, for an initial period of four years, automatically renewed from year to year thereafter unless either party had, not less than six months prior to the expiration of the initial term or each anniversary thereafter, given six months notice of termination to the other (clause 2.1). Clause 2.2 provided that the agreement terminated forthwith upon the occurrence of any of a number of specified events, including failure to perform an obligation under the agreement and to rectify the default within 30 days after receipt of notice of default (clause 2.2.1), entry into a deed of assignment or deed of arrangement adversely affecting the ability of either party to perform its obligations without the approval of the other (clause 2.2.2), ceasing or threatening to cease to carry on business or going into liquidation (clause 2.2.3), being placed under official management (clause 2.2.4), undergoing a change in shareholding or officeholders which, in the reasonable opinion of the other party, has an adverse effect on the ability of the party to perform its obligations (2.2.5), or if an officer or director is declared bankrupt, enters into a scheme of arrangement or goes into liquidation (2.2.6). 2 By clause 3.1, ACES agreed to procure the execution of new licence arrangements between Mikohn and customers for Mikohn's products, and Mikohn agreed to sign such licence agreements. Mikohn derives its income, relevantly, by providing table games to casinos under licence agreements in respect of which the casino pays Mikohn a licence fee. Clauses 3.2, 3.4, 3.5 impose additional obligations on ACES to foster and promote the distribution of Mikohn's products. 3 Clause 4.1 requires ACES to provide certain maintenance and support services to Mikohn's customers. Clause 4.2 requires ACES to provide certain storage facilities for parts and inventory, and clause 4.4 requires ACES to keep a stock of inventory. 4 Mikohn's duties under the Distribution and Service Agreement are specified in clause 5. None of them are immediately relevant. 5 Clause 6, entitled "Payment", provides as follows: 6.1 Mikohn will continue to pay for ACES the amount due under previous contracts and existing installations including the placement fee and service fees as set out in the attached Schedule A. The fees payable will be reduced accordingly in the event product numbers are reduced in those installations.