Cafike Pty Ltd trading as Port Arthur Cider Company v R.R. & S.M. Powell Pty Ltd [1988] FCA 258

Federal Court of Australia|1984-05-04

2 - - - JUOGMENT No. A584 an arrangement. A possible price structure was discussed. Mr. Peterswald says that he then indiszated to Mr. Powell that it was

Cafixe's wish to maintain some "control prices were mentioned. It is common grsund that the parties wera

appropriate wholesale price for apple juice; and that Mr. Ocwell then indicated that approximately 30 cents shculi be allowed For the container and the label, that Grove''s distributors would ask for 28 cents per unit for distribution and that Grove wouid require 22 cents per unit to handle the product. It is also common ground that Mr. Peterswald then accepted that, on these

figures, a deal was only feasible if Cafike were prepared to

accept $1.10 as the price per unit it would recezive from Grove.

Aitheugh the discussion was in general terms and necessarily tentative, Mr. Peterswald informed Mr. Powell that he would write a letter to Mr. Powell stipulating the basis, in terms of price,

By letter dated 4 May 1984, Mr. Peterswald wrote to an

"further to our conversations regarding the marketing of apple juice, we have arrived at some costs for you to consider.

Firstly, in respect of a volume of around 1000 units per week, we think that the following price structure looks reasonable.

Wrolesale 1.90 Distributor 2B $1.62 Package 30 $1.32 Grove 22 $1.10 If sales or (sic) arsund 2000 units ver week were achieved we could reduce the unit cost by arcund five cents. As I mentioned on the phone todav our preferred FS ¥ E position would now be to give you th sole Gistributien rights, using the "Apolemaid" abel provided a minimum level of sales (say 1200 vw. was achieved. Thi would save ¢ceveloping a new label and point of sale promotional material, as well as TV and radio packages. Qur costs are calculated including 'the cost of these items as well as the initial promotional expenses.

is common ground that a "unit" was a two litre container

refrigerated juice; that $1.90 was the wholesale price; that 28

cents was the projected cost of delivery and distribution retail outlets by contractors (described by the ovarties "independent distributors" or "vendors"); that 30 cents allowed as the cost of the container, the cap, the labe2? and carton in which a number of containers were packed; that

cents was the margin to be allowed to Grove for its efforts;

shortly afterwards, Mr. Powell indicated that the terms of

letter "looked okay". It was arranged that they meet at Koonya to discuss the matter further. It is common ground that, at this

stage, both parties were keen to enter inta a long term

The Koonya meeting took place as arranged. There was a Lengthy discussion. It is commen ground that the parties then

concluded an agreement but there 1s a dispute as to some of 145

terms. Evidence of this discussion was given by the hr

persons present - Mr. Peterswald, his wife, Mrs. Rosemary

Peterswald (another director of Cafike!, and Mr. Powell.

According to Mr. Peterswald, the discussion proceeded as follows: (a) Mr. Powell agreed to the proposition contained in the 4 May letter, subject to proof of packaging costs as actual costs incurred; the sum of 28c. was confirmed as the price to be paid ta contractors to deliver the product from Grove's

warehouse to retail outlets; Cafike agreed to bear the

cost of cartage from Koonya to Grove's warehouse; (hb) the parties agreed that although Cafike would bear the promotional costs already incurred, all future costs of promotion would be shared equally by Cafike and Grove; (c) Mr. Peterswald asked for a "guarantee" of "minimum throughput"; Mr. Powell thought that he could "achieve" 100,000 litres per year (i.e. approximately 1,000

indicated that Cafike wished to maintain "control" over the price at which its product was to be sold by Grove to retail outlets; Mr. Powell agreed that this was a reasonable proposition. It was accepted by both parties

would have tc be mutually agreed; it was further agreed

that Cafike's apple juice would not be sold by Grove at a price higher than the wholesale price of orange juice (at that time, Grove's wholesale price for orange juice was $1.90); (@) it was agreed that Grove''s trade rame "Grove" would appear on Cafike's "Applemaid"™ label on the containers holding Cafike's product; (f)} 1t WAS agreed that, subject to Cafike's right to continue te deal with Chung Sing, Grove should have the exclusive right to sell Cafike's juice in Tasmania with Cafike retaining distribution rights outside Tasmania; Grove also agreed not to sell any competing product; (g) Grove agreed to pay for product on a 30 day account basis;

(h) a new type of container was agreed upon; (i) it was arranged that another sticker he designed to he placed on the top of the container stating that the product was 100 per cent fresh apple juice; (j) it was proposed that the new product be launched in June or perhaps July; (k) the agreement was to last for five years with two

options to renew of five years' each; (1) Mr. Powell

was to arrange for the agreement to be put into a written form; (m) as an administrative matter, it was proposed that Cafike outlay in the first instance the cost of the container and the cap and Grove pay the cost of the label and the carton in which the containers were packed on the footing, in each case, that the party meeting these costs would be reimbursed out of the

proceeds of sale arising on the wholesale transaction at

In his evidence, Mr. Peterswald explained that, at the Koonya meeting, Mr. and Mrs. Peterswald had before them an aide-memoire prepared by Mrs. Peterswald to serve as an agenda of matters to be discussed with Mr. Powell. It was in the following terms - (For convenience a typewritten version was prepared at

the hearing and this version precedes the handwritten one):

WE PAY PROMOTION COSTS SO FAR. 50/50 AFTER MINIMUM THROUGHPUT 100,000 LTRS CONTRACTUAL ARRANGEMENT WHAT PERIOD PRICE VARIATIONS INDEXED TO ORANGE JUICE ?7 5+5+5 J STILL MAINTAIN DISTRIBUTION RIGHTS OUTSIDE TASMANIA TIME FOR CONTRACT DO WE WANT TO BOTTLE HIS qurey Vv TERMS OF PAYMENT. 30 DAY a/c BIG STICKER ON BOTTLE J . BOTTLE TYPE / 250ml. ETC 10 SUPPLY OF BOTTLES - LABELS ETC 11.CHUNGS STILL GET ORCHARD PRESSED

3 i 12.CARTAGE UP b : 13.SOUTHERN FRUITS LAUCH WITHIN NEXT 2 WEEKS 14.PACKAGING PROCUREMENT -20 PRODUCT LIFE 7 JUNE ?12

; Ly ([a6end obi - - - | Lap by A Pee K hahet ek on Phus pe reload frccael}

It will be noted that item 3 in the aide-memoire referred to the period of any contractual arrangement. The document also mentioned the figures "5 +5 +5". Mr. Peterwald said that it was agreed that the arrangement between the parties was to subsist for a period of five years with options ta renew for two further periods of five years' each. It will also be noted that item 5 in the aide-memoire mentioned "time for contract" with a tick beside it. Mr. Peterswald said that he wrot the figures "5 + 5 + 5" on the aide-memcire at the meeting. It will also be recalled that item 3 in the aide-memcire also referred to price variations in the context of prices being indexed to orange juice prices. Mr. Peterswald's understanding at the time was

that the wholesale price then of a two litre container of chilled

Mr. Peterswald said that after the meeting concluded, Mr. Powell stayed on at his home for dinner at his request. It was then mentioned that the agreement should be formalised in

Mrs. Peterswald substantially corroborated her husband's account of the meeting. She also referred to Mr. Peterswald's concern that ""control" be retained by Cafike over the wholesale price at which Grove was to market the juice. Her evidence was that it was agreed that any variation proposed to the wholesale orice was to be the subject of discussion with, and agreement by,

Mrs. Peterswald also confirmed that it was arranged that the sum of 28 cents was to be allowed as the cost of distribution. However, she said that it was accepted that this cost was not applicable in the case of sales to supermarkets. In the1rr case, it was anticinated that distribution costs would be less than 29 cents and that

In one respect, namely, the time limits of the agreement, there was a discrepancy in the versions given by Mr. and Mrs. Peterswald respectively. Although Mrs. Peterswald recalled a discussion of a five year term together with two five year options, Mrs. Peterswald did not recall any definite conclusion being arrived at in this regard. She thought that it was accepted that this was something which needed to be left to the solicitors

Mr. Powell gave evidence that in his discussions with Mr. Peterswald prior to the Koonya meeting, he had informed Mr. Peterswald that, in his opinion, a fair market price for his product on a wholesale transaction

was $1.90 and that Grove's distributors should receive a

Mr. Powell's version of the agreement reached at Koonya

was as follows: (a) Grove's initial wholesale selling

price was to be $1.90; (b) Cafike was to receive from Grove $1.10 for its product; (c) any variation to "price structure" (i.e. Cafike's selling price to Powell or Powell's wholesale price) would be the subject of "mutual discussions" or alternatively would proceed by "independent arbitration" (according to Mr. Powell, this term was arrived at as a result of a statement made bv Mrs. Peterswald that Cafike wished to retain "total control of the wholesale price"); (d)} the name "Greve" would appear on the label along with 'Applemaid"; Ce) the arrangement was to subsist for five years with two options to renew for periods of five years each; (f) Cafike was to bear the promotional costs already incurred but future costs of promotion were toa be shared equally; (g) packaging costs were estimated at 30 cents; however, until Cafike had generated sufficient cash flow to pay for packaging costs, Grove was to

provide the labels and the cartons so that Cafike had only to outlay, in the first instance, the cost of the containers (at 2.04 cents each) and the caps (at .2

Mr. Powell said that the parties then discussed, in a general way, the need to retain solicitors to draw up a formal

agreement. There was also talk that Grove might later acquire an

agreement was arrived at in the Koonya meeting. But there are

several questions of fact and of law which arise for determination as to what, if anything, was agreed in two main areas:

(2) the rights, if any, of Cafike in respect of the wholesale

These questions are central to the present dispute. Before attempting to resolve them, 1t is necessary to describe

The course of dealings between the parties (1) August 1984 to September 1986.

Deliveries of product from Cafike to Grove commenced in August 1984. The invoiced price available by Grove to Cafike was agreed at $1.323 per container, being $1.10 for the juice and 22.3 cents for the container and the cap. As from 1985, it was agreed that the price be increased to $1.37 per unit. The increase, of .05 cents, was represented substantially, if not wholly, by an increase in the costs of packaging. In September 1985, Cafike introduced a "long life" product as well as its original refrigerated version. Marketed as "Longlife Applemaid", its agreed invoiced price to Grove until 1 October 1986 was $1.51 per unit in the case of "Straight" apple juice and $1.61 for each

It was subsequently agreed that, as from 1 December

1985, the invoiced price of chilled juice increase from $1.37 per

unit to $1.44; this price was increased to $1.45 as from 1 January 1986; it appears that these increases were allowed to cover the cost of the cartons which it was agreed that Cafike

Against the background of a number of significant discussions which took place between the parties in 1986, the prices to be paid by Grove to Cafike were substantially increased as from 1 October 1986. Details of the new price structure, which is complicated, will be mentioned later. By September 1986, the packaging costs borne by Cafike had increased to 0.4992

Bottle $0.2403 Cap 0213 Carton -9736 Tape O01 Wrap -O1 50% label 031 Neck Label .013 Carrying cost .O1 $0.4092

In February 1987, the relationship between the parties

collapsed and Cafike ceased to supply its products to Grove.

(i) Conversation in late January or early February 1986

(a) Mr. Peterswald's version Mr. Peterswald said that in late January or early February 1986, he spoke to Mr. Powell in his office

Cafike was feeling considerable cost pressures in its operation and "would be very keen to get a

Mr. Powell said that he was also experiencing cast pressures in orange juice and that he would like to put his orange juice prices up. Mr, Powell said that he "thought he could not do that in isclatzion in the market but he thought there would be a general tendency during the next few months far orange juice prices to rise...He would be taking advantage of that and that would be a good time to bring apple juice prices up. I Ci-e. Mr.

At this time, Grove was selling the juice to ordinary retail outlets at $1.90 but, after taking into account rebates and discounts, Grove was receiving something less than $1.90 from the

Mr. Powell said that he "voiced Chis] concern to Mr. Peterswald at the large volume of funds we were outlaying and the general increases that the retailers had applied to promotional costs of products." Mr. Powell said that he told Mr. Peterswald that he "was going to increase the price

"MR. BROWN: ...Did you then have discussion with Mr Peterswaiid with respect to th future of your company and his company?-- do net believe that we had exhaustiv discussions in January or February or March of that year towards that end.

Did you subsequently have some discussions towards that end?---Yes, not till later on, but at that stage we were dwelling on price and I put to Mr Peterswald that it was

almost two years that we had been - our price had increased from Cafike. Our general costs had increased. We had

maintained the price for almost two years. Our promotional costs were increasing and we would have to move but there was no mention of anything else much at that stage...

HIS HONOUR: Was there no discussion abcut figures?---Figures?

When you say, have to move?---Exactitudes. No, your Honour, all of the work with the grocery trade with working out the margins, the promotional schedules, the promotional moneys was left to me.

Yes, but did not - did Mr Peterswald as what sort of price movements wer likely?---I am pretty sure that I indicat that a general price of 10 to 15 per cen would be necessary to look towards redressing the erosions we had had of the previous two years.

Erosion vis-a-vis inflation or what?---CPI increases, your Honcur?

Yes. And you did mention that sort of thirg to him, did you?---Yes, your honour."

"You had made a price change without reference at least - and we will come back to discuss this in a minute - without reference at least to the details of the price change to your customers, without reference to Cafike?-- We had etfected one price change only in the whole duration of our agreement and that was effected in April 1986 with tacit approval being obtained and knowledge of Mr Peterswald in February of that year.

But on no version of the facts do you put forward that you consulted Mr Peterswald with the amount of the price rise?---Yes, I did. I explained to Mr Peterswald at that time that I anticipated that Aa price increase be in the range of 1C to 15 certs."

",.-I did explain that it would be in the region of 10 to 15 per cent and I think that I justified the amount of that increase when

I went through the charges that our company was absorbing with Mr Peterswald..."

some supermarkets had increased the retail price of "Applemaid" by 20 to 30 cents. He

"And what did you say to Mr Powell? What did you put to Mr Powell?---T said ta Me Powell had he seen the prices in the supermarkets; did he have any reasen why they were as they were and he said tu me, "T think the supermarkets must be beng greedy".

far as taking the problem on board?---Right. He said that he would approach the supermarkets and see tf

Did Mr Powell say anything to you that he had increased the wholesale price during

(b) Mr. Powell''s version Mr. Powell did not have a clear recollection of this conversation, although he did recall a discussion with Mr. Peterswald about prices in May 1986, to which reference will be made shortly. However, Mr. Powell accepted that, at about this time, Mr. Peterswald raised with him the price rises in the supermarkets and Mr. Powell did say that "the supermarkets must

Prices were again discussed at a meeting held in May 1986 in Mr. Powell's office between Mr ind Mrs. Peterswald and Mr. Powell. The meeting tack place after Mr. Peterswald discovered, by inquiries made of supermarkets, that Grove had substantially

increased its wholesale price - in some cases by as

"put the prices up in supermarkets throughout Tasmania. This was done without our knowledge and we regard it as a breach of the agreement. We want an immediate remedy to the situation." Mrs. Peterswald asked Mr. Powell "why had he done it?" Mr. Powell replied that "he had done it because he had not been making much money out of the proposition." Mr. Powell accepted that Grove was in breach of tle agreement, Mr. Peterswald's evidence

"Well, what was then discussed?---I put two options to Mr. Powell, either that the pricing situation was remedied immediately and that we return to the margins that we had agreed on - - -

Yes? --- - - - or - we had had previous discussions on him having equity participation in the company, which was a

Yes? --- - - - potential problem, and I said that along with the equity participation in the company must come = an agreed pricing structure which would

Yes. Were there any other options put to him?---And the third option was that if

neither of those were taken we separated as from that day.

Right. Now, what did Mr Powell say to those three options?---He said that he was happy to pursue the proposal of equity participation, that he saw that as the only alternative for us fo continue trading.

Right. And could ycu tell us what you discussed so far as equity participation

was concerned?---I produced for the meeting - which I gave to Mr Powell during the meeting - a series of notes. The

first page of that explained the variation in margins that he had achieved, in most cases his margin had been double.

Yes. I said that that situation was completely unacceptable.

Yes?---And the new proposal put to him a series of pricing structures which would

compensate Grove for the actual costs that they incurred in performing the function and would be an integral part of the equity participation, so that equity participation had two facets to it; purchase of equity and an understanding of the price structure that would be implemented.

Right. Now, could you tell us, please, what Mr Powell said when you said to him that if you could not reach equity participation and return to the original price structure then you would have to terminate your relationship?---He agreed to that proposition."

Manufacture $1.10 68% ) Package 30 18.5%) Grove .22 13.5%

($2.00) Manufac. & package $1.45 72% Grove (.5 label) «685 28%

Manufac. & package $1.45 68% Grove (incl deliv.) -67 32%

Current margin - Coles ($1.91) Manufac. & package $1.45 7h% Grove (no dist/whouse) .36 24%

The current margins are unbalanced and do not reflect fair and reasonable reward for functions performed. The agreed price of the fresh product has

More efficient means of distribution exist for many customers.

The point of sales performance by distributors has been patchy.

Management decisions effecting P A Cider must be made by P A Cider Management.

Stemming from the above, we need to agree on the resolution of these problems or operate separately.

Resolution is dependent on Steve having the intention and opportunity of equity participation in P A Cider."

Mr. Peterswald put to Mr. Powell, and Mr. Powell accepted, that their discussions about possible future "equity participation" was not to delay implementation of a price rise far Cafike. Mr. Powell said that he would, "within the next month, rectify the price

Mrs. Peterswald's version Mrs. Peterswald's account was in substance in the same terms as that given hy Mr

Mr. Powell disputes much of the version given by Mr. and Mrs. Peterswald. His evidence wus

"Do you recall what he said?---Mr Peterswald said to me that he believed the products - the prices of the Grove Apple Maid products were too high in the supermarkets and believed that as a consequence my company must be making too much money out of them.

Yes?---And that seeing as he had not received an increase in the price trom us he thought that that was not fair. T explained to Mr Peterswald that the price that was achieved at retail level Was not necessarily - the difference between that price and the price we were paying him was not our profit; there were a lot of other things that eroded that amount, and went along those lines to try and reinforce in Mr Peterswald's mind that there was not an excessive amount of increase being - had been applied by our company when we had had our price increase.

Right. Was there any discussion between yourself and Mr Peterswald as to whether or not that was in breach of any agreement between you?---Mr Peterswald did not discuss any breach of agreement at that stage.

Now, you had the discussion about price, did that lead Mr Peterswald to come up with any proposal to you?---Well, Mr. Peterswald seemed to think - - -

No, I am sorry, did he say anything to you?-~-He said that there seemed to be a problem in us having adjustments of our margins, in other words his maryin might have decreased whereras now with the price increase, mine might have increased and that he thought the only way we could do something about that was either to look at simplifying distribution methods, several proposals about distribution, or looking at a joint venture, or I think he might have had on his note, going separate ways.

All right. Did he discuss going separate ways as one of the matters?---No.

He brought a note with him to the office, did he?---That is correct.

Did he give you a copy?---I believe he left a copy.

Yes. Did you read that prior to having any aiscussions with him?---No."

Second conversation in May 1986 Later in May, another discussion tock place in Mr.

Powell's office. It is common ground that at this meeting Mr. Peterswald produced a written document outlining a basis upon which Grove could acquire an "equity" in Cafike. Under the proposal in the document, Grove was to pay $25,000.00 immediately, and the Peterswalds were to lend Grove $90,900.00 over three years at 14 per cent; repayment could

"take the form of capital injection to the company."

A series of meetings were held in July and August 1986 (4 and 11 July, 14 or 15 August) between the parties and their accountants. There was lengthy and detailed discussion of the financial position of Cafike and of the terms on which Grove might acquire an "equity" in Cafike. It is common' ground the substance of these discussions was recorded in notes made by Mr. D.A.C. McDougall, a chartered

other evidence indicate that the negotiations proceeded on the following footing: (a) Grove would need time to examine Cafike's financial records; for this purpose, Cafike's books would be made available to Mr. J. Pastoor, an accountant employed by Grove; (b) Grove would have until 1 January 1987 to exercise its "option" to take up an "equity participation" in Cafike; (c) an the interim, Mr. Pastoor would write up Cafike's books and do certain

It is also common ground that the parti1e6 recognised that a deal could only be achieved 1f satisfactory

the shares held in Cafike by Mr. Hallam, a muir.ority shareholder.

According to the notes kept by Mr. McDougall of the meeting held on 11 July, Mr. Powell made it clear to Mr. Peterswald that, so far as he (Mr. Powell) was concerned, the negotiations were proceeding against the background of the parties' "snrrent axyangement".,.on heads of agreement...5 years + © years + 5 years. To forgo this would he expensive....

On the other hand, Mr. McDougal?''s notes, of 14 August meeting quote Mr. Powell ani Mr. Peterswald

for Grove not to be involved, Peter-wald say. no value...

2-1/2 years ago could well have been broken by Grove increasing the price without reference to Peterswald."

"GENERAL

The purpose of the meeting was to discuss

the trading situation of the Port Arthur Cider Company (PAC) with a view to improving its trading terms and improving its capital situation hy the participatian in the company by R R & S M Pewell Pty [Lia (Powell).

It was recognised that the PAC was not in the capital situation and did not have the distribution capacity in its current form tu undertake a successfiil expansion into the production of ciders and carbonated fruit beverages based on a glass carbonated bottling line, Powell indicated that they were prepared to enter into an arrangement with PAC provided a new corporate entity was established controlling current PAC operations and the operation of the expanded facilities, and that they had the option to purchase a 50% equity in the new entity. This option was to remain open until 1 January 1987 and is calculated on the basis of 50% of the current operation being valued at $92,500. In the event of additional plant or capital being placed in the PAC prior to the option being exercised the price of obtaining 50% equity would reflect the situation, For instance, if the Tasmanian Development Authority provides capital to the PAC Powell must resume its share of liability, and if the capital 15

injected by R K Peterswald, Powell must also inject a proportional amount,

RESOLUTION: It was agreed that a new entity would be established with Powell having the

option of purchasing 50% of the shareholding by 1 Jan 1987.

The current terms of trade between PAC and Grove Fruit Juices were discussed. The following was agreed:

Gross 13.20 per carton Gross 14.10 per carton 8% 12.144 Dist 9% 12.83 2% CD 11.90 2% CD 12.57 Grove 6% 11.18 Grove &% 11.P) Freight 37 Treight - .45_

Delivered to Grove (1.890) Delivered tuo Grove (1,89)

NOTE: Ordering and invoicing through Grove, distribution PAC GROVE> COLES.

PvC_2 LTR FRESH 2 LTR Gross 13.20 per carton Gross 14.10 8% WH 12.144 2% TD 13.81 5% TD 11.536 15% Grovell.?74 per ctarton

NOTE: Ordering and invoicing through Grove. Distribution PVC, PAC > PURITY: Fresh, PAC -7 GROVE 7 PURITY.

Freight .37 10.80 per carton delivered to Grove (d) GROVE PVC FRESH Store Vendor 12.30 12,00 Grove 10% 11.07 (1.84) 11.04 (1.84)"

Peterswald's account was that the new prices were to

come into effect as from 1 September 1986. In fact, this

was delayed and the new prices were not implemented until 1 October. For that morth and November and December products were supplied by Cafike and paid for by Grove at the higher rates. Products were also supplied to Grove in January and February 1987. Cafike invoiced Grove for these products at the new prices but Grove paid only part of the invoiced amount and refused to pay the balance because, in February, negotiations for the acquisition of "equity" by Grove collapsed in circumstances to be

(a) Mr, Peterswald's version There were a number of meetings betweer: the parties

Powell informed him that he "saw no reason why he would not proceed with the option" On 15 January 1987 Mr. Powell said that he would make "a once and

final" offer of $25,000.00 for Cafike Mr. Peterswald told Mr. Powell that he found the offer "insulting". Mr. Powell replied that the trading figures over the previous six months did not justify the price of $90,000.00 previously discussed. (In fact this figure had been altered t* $87,750.90 to allow for the buy-out of Mr. Hallam's shares. Mr.

and Mrs. Peterswald had acquired Nr. Hallam's shares at a

cost of $16,000.00 in October 1986). "r. Peterswald then

said that cash flow had suffered in recent times because it had been used to finance the development of two new products - "Tasman Scrumpy" and "Tasmanian Cider Cooler". Mr. Peterswald then indicated that he

Mr. and Mrs. Peterswald then went away om holidays. In late January or early February, Mr. Peterewald informed Mr. Powell that he had still not made up his mind on Mr. Powell's offer but that he was still unhappy about it and that he would ask Mr. McDougall

On 19 February, Mr. Peterswald reminded Mr. Powell that he had not taken up the earlier option = $ and informed Mr. Powell that his coffer of $25,900.00 was rejected. Mr. Peterswald also said that he nronpased to lease distribution of "Applemaid" to Grove from 1 March. Mr. Peterswald confirmed his) positian by letter to Mr. Powell dated 19 February in the

"T wish to confirm my verbal advice of taday. As from 1 MAR 87 TI intend to cease distribution of

'Apple Maid' products through Grove Fruit Juices, as it appears that we cannot put in place an

(a) Maintains the pricing structure on which our arrangement was based. It remains unacceptable to me that a significant change in the price structure of our product was arbitarily introduced by you, without reference to me, resulting in the complete corruption of the agreed margins.

(b) Ensures adequate loyalty to the 'Apple Maid' brand. It is not acceptable that you are

in a position of promoting a brand in competition to ours, and to find that product replacing ours in specific markets.

Should you wish to discuss continued distribution under arrangements which are compatible with those which we had agreed I will be happy to hear from you.

As far as our production of Mr Juicy products is concerned, I have no wish to disrupt your supply

and will be happy to discuss this if you should wish."

(The reference to Mr. Juicy 1s to another product in

respect of which the parties entered into a separate

version of their meeting on 15 January. WYowever, Mr

"Mr. Peterswald told me that negotiations had been concluded with another party for the sale of the

50 per cent of Cafike and that we would not be receiving product as at the end of that month, which was the end of the following week, and that he would be doing the distribution and that the 50 per cent of Cafike that we were negotiating about had been sold to others.

What did you say in response to that?---Well, I was incredulous and - - ~

But what did you say?---Well, I asked Mr Peterswald whether there was any possibility of redemption from this position.

Yes?---But Mr Peterswald was quite adamant that the sale to other parties of the 50 per cert we were looking at had been concluded and that there

was no possibility of any redemption of the situation and that he might be prepared only to look at packaging our Mr Juicy apple juice and apple and blackcurrant juice.

Yes?---And I said to Mr Peterswald that would he please put it in writing, that I was totally incredulous and I believed him to be an honourable gentleman and I did not think he would live with himself after taking that course of action."

Mr. Powell's memorandum dated 23 February 1987 On 23 February, after the relationship between the

parties had collapsed, Mr. Powell prepared a memorandum setting out his version of the history of their dealings. The document was apparently prepared with the object of providing retailers with Grove's point of view. The memorandum was not sent to Mr. Peterswald but he did see it under the circumstances

described by Mr. Powell in his evidence as follows:

you do - Mr Peterswald or what did you do with it?---Yes, I gave it to Mr Peterswald and Mr

McDougall to read while I was there and - while they were in my office and - which

going to take it but I asked him to leave there and I had circulated those to other

amongst the documents it should have discovered so - but Mr Peterswald and McDougall sat down and read the contents of letter in my office."

Peterswald, Director Cafike Pty. Ltd. approached myself at

210 Collins Street re Grove Fruit Juices being willing to distribute their Port Arthur Cider Co's apple juice product "ORCHARD PRESSED APPLE JUICE,"

product needed improving with special attention to ensur- ing product life-span.

product/labelling, packaging and presentation sub- standard.

Grove Fruit Juices needed sole distribution rights to gain full market penetration with orderly marketing.

Grove Fruit Juices was considering purchase option on cool rooms, packing sheds and orchards in Huon Valley for pressing and packaging fresh apple juice.

and rather than post it I did believe that Mr Peterswald got a copy of it so - plus it was

Mr. Peterswald was advised that although he had been rejected by our industry competitors, we might be interested ina

manufacturer/distributor agreement shculd he wish to implement a, 6 and c above in a joint venture product as we believed in

and were currently working towards releasing a fresh apple juice.

Mr. Peterswald reverted several weeks later to the effect that Cafike Pty. Ltd. were very interested in pursuing a manufacturer/ distributor joint venture product and a meeting was held at Koonya in April 1984 for the purpose of formalising the agree- ment. Mr. and Mrs. R. Peterswald were present on behalf of Cafike Pty. Ltd. and myself on bvbehalf of Grove Fruit Juices (Tas.) The following minutes were tabled and agreed upon by

A joint venture apple juice product "GROVE APPLEMAID" would be conceived.

Cafike Pty, Ltd. to be producer/manufacturer, Grove Fruit Juices (Tas.) ta,be sole purchaser/distributor.

Manufacturer/distributor agreement for period of five years, with two five year options.

At a glance

Court

Decision date

Source

Judgment (426 paragraphs)