Darryll Cullen v ZLB Behring LLC [2006] NSWSC 265 | Case summary

Darryll Cullen v ZLB Behring LLC [2006] NSWSC 265 | Case summary | Zoe

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ADC v White & Anor (unreported, Supreme Court of New South Wales, 8 February 1999, Einstein J) Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101 Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441 Australia China Business Bureau Pty Ltd v MCP Australia Pty Ltd [2003] FCA 934 Australian and New Zealand Banking Group Ltd v Frost Holdings Pty Ltd [1989] VR 695 Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 Baulkham Hills Private Hospital Pty Ltd v G R. Securities Pty Ltd (1986) 40 NSWLR 622 Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61 Brunninghausen v Glavanics (1999) 46 NSWLR 538 B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343 Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251 Electricity Corporation of New Zealand Ltd v Fletcher Challenge Energy Ltd [2002] 2 NZLR 433 Gissing v Gissing [1971] AC 886 Godecke v Kirwan (1973) 129 CLR 629 Graham Evans Pty Ltd v Stencraft Pty Ltd (2000) 16 BCL 335 G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 CASES CITED : Heysham Properties Pty Limited v Action Motor Group Pty Limited & Ors (1996) 14 BCL 145 Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Limited (1990) 20 NSWLR 310 Hospital Product Ltd v United States Surgical Corporation (1984) 156 CLR 41 Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 Kofi-Sunkersette Obu v A Strauss & Co Ltd [1951] AC 243 Legal & General Insurance Australia Ltd v Eather (1986) 6 NSWLR 390 Lohar Corporation Pty Ltd v Dibu Pty Ltd (1976) 1 BPR 9177 Love & Stewart Ltd v S Instone & Co Ltd (1917) 33 TLR 475 iMackay v Dick (1881) 6 App Cas 251 Magill v National Australia Bank Ltd [2001] NSWCA 321 Masters v Cameron (1954) 91 CLR 353 Meehan v Jones (1982) 149 CLR 571 Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd's Rep 601 Prenn v Simmonds [1971] 1 WLR 1381 Ryan v Textile Clothing & Footwear Union of Australia [1996] 2 VR 235 Sinclair Scott & Co Ltd v Naughton (1929) 43 CLR 310 Sportvision Australia Pty Ltd v Tallglen Pty Ltd (1998) 44 NSWLR 103 Spunwill Pty Ltd v BAB Pty Ltd (1994) 36 NSWLR 290 Summer v The Commonwealth (1918) 25 CLR 144 Telstra Corporation Limited v Australis Media Holdings (1997) 24 ACSR 55 Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486 United States Surgical Corporation v Hospital Products International [1982] 2 NSWLR 766 Vroon BV v Foster's Brewing Group Ltd [1994] 2 VR 32

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14 In Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101, Ipp J treated closely (at [111] et seq) with the necessity, once a requisite intention to enter legal relations was shown, for the Court to determine whether the contract was so incomplete or uncertain as to be void. His Honour cited the following passage from the judgment of Lloyd LJ in Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd's Rep 601 at 619: "It is sometimes said that the parties must agree on the essential terms and that it is only matters of detail which can be left over. This may be misleading, since the word 'essential' in that context is ambiguous. If by 'essential' one means a term without which the contract cannot be enforced then the statement is true: the law cannot enforce an incomplete contract. If by 'essential' one means a term which the parties have agreed to be essential for the formation of a binding contract, then the statement is tautologous. If by 'essential' one means only a term which the court regards as important as opposed to a term which the court regards as less important or a matter of detail, the statement is untrue. It is for the parties to decide whether they wish to be bound and, if so, by what terms, whether they are important or unimportant. It is the parties who are, in the memorable phrase coined by the Judge, 'the masters of their contractual fate'. Of course, the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later. It happens every day when parties enter into so-called 'heads of agreement'." 15 I draw attention immediately to the proposition that it is the parties who are "the masters of their contractual fate". It is the parties who are to decide what are the terms which are to bind them. As well be seen in what follows, the decision in the proceedings applies that proposition. 16 Questions of incompleteness and/or uncertainty are returned to below in the judgment. General approach 17 Other expressions of the general principles include: · The court is dealing with a commercial contract. In construing the meaning of a term the Court will strive to give the agreement a commercial, reasonable and rational operation: Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109. · As Kirby P observed in Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Limited (1990) 20 NSWLR 310 at 313-314: "Whoever may be the parties to the agreement, it is the fundamental rule, that a Court should give the words of a written agreement the natural meaning that they bear. Subject to that rule, in giving meaning to the words of an agreement between commercial parties, Courts will endeavour to avoid a construction which makes commercial nonsense or are shown to be commercially inconvenient. This is because Courts will infer that commercial parties would not themselves normally agree in such a way". · There is abundant authority that "court should be astute to adopt a construction which will preserve the validity of the contract", per Mason J, Meehan v Jones (1982) 149 CLR 571 at 529; Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 at 132, per Kirby P. Further the court will strive in dealing with a commercial contract to discern the objective intent of the business relationship or other parameters of such contract in order to give effect to that which the parties may be seen to have bargained for. But always it is to the words of the contract that the court must attend looking in that regard to the whole of the contract to discern the parties intent. · Where mechanical provisions intended to operate over an extended period of time are concerned the court endeavours to follow the mechanics and provisions expressed in the contract in the endeavour to follow, always by looking at the manner in which the matter is expressed, how the parties saw the contract as a working guide to the way forward. · As pointed out in Biotechnology at 135, the court will however not be in a position to in effect spell out that which the parties have for themselves failed to agree upon. Nor will court be no position to clarify that which is irremediably obscure. Nor will court accept for itself a discretion which the parties have, by their agreement, reserved to one or other of them. To do so would not be to give effect to the contract but to change it: Kofi-Sunkersette Obu v A Strauss & Co Ltd [1951] AC 243 at 250 (PC). Intent to enter legal relations 18 It is quite plain that the parties intended to enter into legal relations in terms of the MOU. The issue is as to the proper construction of that document in light of the matrix in which it was set, that is, the factual background known to the parties at or before the signing of the MOU, including the aim and commercial purpose of the transaction: Prenn v Simmonds [1971] 1 WLR 1381; Legal & General Insurance Australia Ltd v Eather (1986) 6 NSWLR 390 at 394. Objective test 19 The general test of objectivity in terms of construing a contract is pervasive in the law of contract. Two passages from speeches of Lord Diplock illustrate the point (as Gleeson CJ said in Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 549). · In Gissing v Gissing [1971] AC 886, his Lordship said:

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"The first relevant principle of law is that pre-contractual conduct is only admissible on questions of construction if the contract is ambiguous and if the pre-contractual conduct casts light on the genesis of the contract, its objective aim, or the meaning of any descriptive term: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 347-352. The second relevant principle is that post-contractual conduct is admissible on the question of whether a contract was formed: Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 at 77; Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 at 668, 669 and 672; B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147 [97011] at 9149 and 9154-9156; Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251 [97023] at 9255. The third relevant principle is that post-contractual conduct is not admissible on the question of what a contract means as distinct from the question of whether it was formed. As explained by Priestley JA (Meagher JA agreeing) in Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 326-330, the status of the relevant High Court authorities is unclear: hence unless it is demonstrated that the later decisions of the Victorian Full Court and Court of Appeal against admissibility, Ryan v Textile Clothing & Footwear Union of Australia [1996] 2 VR 235 and FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343, are clearly wrong or they are overruled, they should be followed in New South Wales. No attempt was made to demonstrate that they are clearly wrong. 22 Post-contractual conduct being admissible on the question of whether a contract was formed, post-contractual conduct is plainly also admissible on the question of whether a contract has ceased to be binding: as for example by abandonment or termination or discharge. Masters v Cameron (1954) 91 CLR 353 23 It is necessary to recall the three classes for which the decision of the High Court is authority. The passage in question at 360 is in the following terms:

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"…the decisive issue is always the intention of the parties which must be objectively ascertained from the terms of the document when read in the light of the surrounding circumstances: Godecke v Kirwan (1973) 129 CLR 629 at 63; Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 at 332-4, 337. If the terms of a document indicate that the parties intended to be bound immediately , effect must be given to that intention irrespective of the subject matter, magnitude or complexity of the transaction." (per McHugh JA as his Honour then was at 634E-F, with whom Kirby P and Glass JA agreed) [emphasis added] 29 The fourth class has now passed into common parlance insofar as the courts are concerned and is referred to regularly as an accepted classification: see Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486; Heysham Properties Pty Limited v Action Motor Group Pty Limited & Ors (1996) 14 BCL 145; Telstra Corporation Limited v Australis Media Holdings (1997) 24 ACSR 55; Brunninghausen v Glavanics (1999) 46 NSWLR 538. 30 I accept that regardless of classification, the principle that is now recognised is that there can be an informal contract with the expectation that other terms will be negotiated and by consent included in the formal document. That is, to say that such further negotiations and activity regarding other terms is still to take place does not mean the existing informal contract is not binding: Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101 (per Ipp J at 110-111). 31 The fourth class was considered in Graham Evans Pty Ltd v Stencraft Pty Ltd (2000) 16 BCL 335 [Full Federal Court (French, Whitlam and Dowsett JJ) and see also transcript of special leave application which was refused]. Evans brought an action against Stencraft claiming damages for breach of contract. The claim was dismissed at first instance. Evans appealed to the Full Federal Court. The Full Federal Court, in reversing Spender J at first instance, considered Masters v Cameron and applied Baulkham Hills and in so doing upheld the appeal unanimously. The Full Court held that parties may be bound immediately by the terms, which they agree upon whilst expecting to negotiate the terms of, and make a further contract in substitution for, the first contract. Returning to the facts 32 The evidence clearly discloses a most curious contractual relationship in terms of the conduct of the parties following the execution of the MOU. The whole of the period between the date of execution of that document on 24 August 2001 and the occasion when MDA purported to exercise the five-year option on 8 June 2004, is marked by long periods of relative inactivity by both parties. And when the parties did communicate at all, they were mostly complaining about one another's conduct. From Aventis' side of the equation, the evidence discloses that it, appearing to have been extremely anxious at having entered into the MOU, went about:

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[Immediacy of entry of particular products into the Australian market was referred to prior to the signing of the MOU: one only of the contemporaneous documents to this effect being PX 103] Dealing with the evidence 41 Both parties furnished convenient chronologies seeking to emphasise particular events. 42 By reason of the central holding it likely becomes essentially unnecessary to repeat all of the evidence or even to summarise it all. The convenient course seems to be for the Court to provide a general overview of that which the evidence established without endeavouring to travel every highway and by-way of the detail to which the parties descended in the extensive affidavit evidence read and in the extensive cross-examinations of witnesses. However as it is always appropriate to treat with the facts, I intend to include from time to time some particular detail of the evidence. Events prior to the execution of the MOU 43 On 5 June 2001, a meeting took place at the Sir Stamford Hotel in Sydney. Present at the meeting were Mr Wiegand and Mr Ghandi of Aventis and Mr Cullen and his daughter of MDA. Mr Cullen gave a presentation with slides relating to his experience in the pharmaceutical industry and the proposed entry into the Australian market of products manufactured by Aventis. 44 One of the slides (TB 98A) prepared by Mr Cullen stated "Aventis require quick entry into the Australian market with as many products as possible from the portfolio of Aventis Behring". The slide then listed, inter alia, Helixate, C1 Esterase (Berinert P), Anti D (Rhesogamma) and Heamate P and for each of those products stated NOW. Mr Cullen agreed in cross examination that he believed at the time, and intended to convey to Aventis, that those products could be got into the Australian market immediately [T147.39 - 149.30; T152.18 - 153.51]. 45 Another of the slides (TB 98C) stated that MDA had, when a partner with Immuno from 1989, been the first to break the monopoly of CSL and Red Cross, and that in 1998 Baxter had taken control of the Immuno products. 46 The slides refer to Baxter being in the market [TB 98C]. No reference was made in the slides to any proposal of Baxter to withdraw from the Australian market. 47 During the meeting, Mr Wiegand requested that Mr Cullen provide him with the likely sales volumes and the transfer prices for the products. [TB 99, 100] 48 On 11 June 2001, Mr Wiegand sent a facsimile to Mr Cullen [TB 100] in which he stated:

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(c) states that 40,000 units of Berinert P had been allocated, with an expiry date of February 2004, and an expected shipment of mid-February 2002. 74 On 25 January 2002, MDA sent an email to Aventis stating that MDA would prefer Humate P if it is available and requesting that if not, Aventis send a statement advising the plasma source of the Haemate P proposed for supply to MDA in March 2002. 75 On 5 February 2002, MDA sent an email to Aventis requesting that MDA be recorded on the Aventis website as the Australian contact for Aventis products. On 15 February 2002, Aventis responded stating that Aventis could not place MDA on Aventis's website as they did not have a signed agreement between MDA and Aventis. 76 On 19 February 2002, Ms Cullen emailed Mr Ho requesting clarification, and on 19 February 2002 Mr Ho responded stating that as a general company policy Aventis does not normally put its customers' information on its web-site. 77 On 25 February 2002, a meeting was held in Sydney between Mr Cheng and Mr Ghandi of Aventis and Mr Cullen and Ms Cullen of MDA. The meeting had been arranged in December 2001 and January 2002 for the purpose of introducing MDA to Mr Cheng. An agenda had been agreed for the meeting. The meeting in Sydney was arranged following Mr Cullen's inability to attend a meeting of regional distributors in Singapore in December. 78 At the 25 February 2002 meeting, Mr Cheng said that as far as Aventis was concerned there was no agreement between the parties. 79 Later on 25 February 2002, Aventis sent a facsimile to MDA confirming the status of MDA's order. The facsimile stated that 50,000 units of Haemate P were expected to be delivered at the end of March 2002 and 20,000 units of Berinert P were expected to be delivered by mid-March 2002. 80 On 8 March 2002, MDA sent a facsimile to Aventis cancelling its purchase order. 81 On 11 March 2002, Aventis sent an email to MDA requesting that MDA give its justification for the cancellation of the order, and noting that the cancellation will create a negative impact to future stock allocation to Australia. 82 MDA did not respond. 83 On 20 March 2002, Aventis sent a letter to MDA which stated that: (a) Mr Wiegand was not empowered to sign the MOU;

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"As discussed today, we would like to resume our partnership agreement in Australia. The basis of this partnership, however, is to sign a distributorship agreement (to replace the previously signed MOU) which need to be reviewed and approved by our management and legal department. We would like to have a more formal agreement that are acceptable to both parties. Attached please find our standard template for your review and comments." 95 On 17 September 2002, Mr Ho telephoned Mr Cullen. According to Mr Ho, during that conversation Mr Cullen said that he did not agree with executing a new agreement and that he wanted to pursue the old agreement. Mr Ho requested whether Mr Cullen was still interested in doing business with Aventis. Mr Cullen replied that he was only interested in maintaining a dialogue with Aventis, and that Mr Cullen was in a meeting and would call Mr Ho back or write to Mr Ho later that day. 96 MDA made no further contact with Aventis on that topic. 97 On 4 November 2002, Aventis sent an email to MDA stating that a representative of Baxter will be contacting MDA shortly about the supply of Berinert P for both Australia and New Zealand. Baxter was a supplier of a product that competed with Berinert P, but Baxter was withdrawing its product from the market. Events between late 2002 and late 2003 98 MDA had correspondence and meetings with Baxter in late 2002 and early 2003 concerning MDA taking over Baxter's customers. Baxter provided MDA with Baxter's customer list (TB 202A, 235) and sales data (TB 250 - 252), and a letter was prepared to be sent to customers (TB 202A, 244A. 253A). 99 In January 2003, the parties attempted to negotiate an agreement on the price for the supply by Aventis to MDA of Berinert P [TB 252A- 252C]. MDA asserted that the market re-sale price was A$2. Aventis said that they were told by Baxter that it was A$3.20 and asked MDA to double check. MDA responded by claiming that the MOU fixed the transfer price at US$0.65. Aventis said that the MOU price was for 12 months and then quoted a transfer price of US$1.20. MDA responded by saying at that price they have no interest. Aventis then reiterated that the re-sale price was A$3.20 (or US$1.85) and that with a transfer price of US$1.20, MDA would have a margin of US$0.65. Aventis requested a counter offer from MDA. MDA responded with a transfer price of US$0.60. That offer was lower than the previous offer MDA had made of US$0.65. MDA never challenged Aventis's claim that the re-sale price was A$3.20 (US$1.85) and never gave any justification for the price that MDA offered. The cost to Aventis of manufacturing the product was US$0.67. Accordingly, MDA's offers were to pay below cost. 100 On 5 February 2003, Aventis proposed a meeting in Australia in March to discuss the price for Berinert P [TB 253C]. Aventis stated that it could not understand why it should sell the product for US$0.60 when the re-sale price was US$1.80. 101 On 17 February 2003, MDA sent an email to Aventis stating in effect that MDA would not attend any meeting with Aventis to discuss pricing for Berinert P unless Aventis sent to MDA within 3 days firm pricing and estimated time of arrival for another product, Haemocomplettan P. The proposed meeting did not proceed, and discussions ceased. 102 Shortly thereafter, Baxter informed its customers that the arrangements with the new distributor (MDA) had fallen through [TB 262A-262E]. Baxter continued to supply the market in the absence of any other distributor.

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103 Some 10 months later, on 11 December 2003, MDA sent a letter to Aventis stating "Can you please advise when [Aventis] will commence supply of the products to Australia according to our contract". At that point in time, there were no open orders placed by MDA with Aventis for any products whatsoever, and there had not been any open orders since 8 March 2002, almost 2 years previously, when MDA cancelled the order that it had made on 12 December 2001. 104 Thereafter, in December 2003, the parties corresponded by email about the possibility of meeting to discuss their business relationship. They could not even make an agreement to meet. Events between early 2004 and 18 June 2004 105 On or about 31 March 2004, Aventis was acquired by CSL Limited (formerly Commonwealth Serum Laboratories). 106 During the period 12 February 2004 to 4 June 2004, MDA placed 5 orders for Fibrogammin P with Aventis, which Aventis supplied, having a total price of US$37,555. These were the first orders placed by MDA with Aventis since the date of the MOU in August 2001 (other than the single order which had been put on hold by MDA on 20 November 2001 and subsequently cancelled by MDA on 8 March 2002). 107 During the period June 2004 to August 2004, MDA also placed 3 orders with Aventis for Berinert P, which Aventis supplied at a price below cost, having a total price of US$35,750. 108 In about June 2004, Aventis also made a sale of Berinert P directly to CSL in Australia. 109 On about 8 June 2004, MDA purported to notify Aventis of the exercise of an option to extend the MOU for 5 years until 24 August 2009. 110 On about 18 June 2004, Aventis sent a notice to MDA purporting to terminate the MOU on the basis, inter alia, of MDA's failure to order products in the quantities contemplated by the MOU and MDA's failure to use its best efforts to provide access to the Australian market for Aventis products. The letter also rejected MDA's claim to have a unilateral right to extend the MOU for a further 5 years. Post 18 June 2004 111 No further purchase orders have been placed by MDA with ZLB. 112 Since about August 2004, CSL Bioplasma (a member of the CSL Group) has managed the distribution of ZLB products into Australia. The essential matters litigated 113 The evidence establishes that both parties misconducted themselves in terms of what was to be expected from the other as appropriate in terms of the MOU. 114 It does not seem to me particularly constructive to allocate blame otherwise than in overview fashion. This is because of the manner in which it seems to me that the proceedings must fail on the technical legal basis that the MOU ceased to bind the parties at the expiration of the initial 12 months of the initial term. It ceased to so bind the parties because they were not able to agree upon prices for nominate product at any stage following the expiration of the initial 12 month period. MDA complaints 115 Treating then with the respective cases on an overview only basis, one begins with MDA's complaints. Not all of these complaints were pleaded.

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Product training 116 MDA had a legitimate complaint in that it had anticipated product training which was provided for in the MOU. Prior to the signing of the document the discussions between Mr Weigand and Mr Cullen had clearly proposed a training programme to take place at about the time the conference was planned in Christchurch due to occur in October 2001. This was an Australasian Haemophilia conference and Mr Wiegan was to travel to Christchurch to assist in the training and to be present during the conference. He accepted that he saw the training programme as an important component in the new business relationship being contemplated and as the kind of process that needed to take place in the early stages of the distributorship agreement. He accepted that it was not good enough for Aventis to provide brochures and documents relating to specifications and that the type of interaction with participants in the industry in introducing new distributorship and its benefits was very important. 117 The point is that by reason of company policy concerned with the 9/11 events, the Aventis participation in the conference simply never took place. There was never any further attempt to provide personal training. As will appear from what follows, Aventis resists the contention that it was guilty of wrongdoing on the basis that there were no requests made by MDA for Aventis to provide training. I do not accept that the statement by MDA in its letter of 24 October 2001 that it had spent a considerable amount of time and money training new personnel for the new product in preparation for the Christchurch conference may be equated as having stated that no close and focused training was needed from and with the assistance of Aventis. 118 It should be noted in passing that the failure of what, qua Christchurch, had been contemplated to be the springboard for commencement in terms of promotion of the new exclusive distributorship is said by MDA to be a real reason for its dismal failure to be able to progress in furthering market demand for product. Source of plasma 119 The next serious course of complaint was the failure of Aventis to provide the detail source as to the source of plasma of the Haemate P which was proposed for supply to MDA in May 2002. This complaint goes as far as to contend that Aventis positively misled MDA by stating in its facsimile of 15 October 2001 that both Humate P and Haemate P " are absolutely the same" [PX 131]. The contention is made out on the evidence. Delayed deliveries 120 The next source of complaint was the delayed deliveries. This is a two-way street as the unfolding of the chronology discloses. However the clear early conduct of Aventis denying that a binding agreement had been brought into existence was plainly repudiatory and meant that MDA did not know where it stood. 121 Each party in fact from time to time acted unreasonably. Orders were placed, only later to be withdrawn. Not many orders were placed at all. 122 The notion of a vibrant ongoing exclusive distributorship fell away very early in the peace, only to be replaced by internecine disputation going, in so far as Aventis was concerned, into denials that there was any binding agreement, followed later by withdrawal of those denials.

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Exclusionary provisions 123 The next source of complaint by MDA was the alleged breach of the exclusionary provisions and of the express provision requiring that all inquiries from the Australian market for product information be passed on to MDA. This is also generally summarised in the unfolding chronology. Commonwealth request for expressions of interest 124 Another serious course of complaint was the failure of Aventis to provide MDA with information to assist it to tender for the National Blood Authority "Request for Expressions of Interest for Supply of Defined products" put out by the Commonwealth Department of Health and Ageing in December 2002. 125 MDA in mid December 2002 sought from Aventis, advice as to which product it would be in a position to supply and as to pricing and quantities for the express purpose of responding to the Expression of Interest. It received no assistance at all from Aventis which gave the excuse that holidays in December meant that it was unable to obtain feedback from its clients for the supply. If anything, all that Aventis had to say amounted to an expression of what might describe as lukewarm interest [PX 244.2] 126 Without travelling through each of these sources of complaint is very plain that MDA had considerable room to complain. Particularly was this the case with respect to Aventis denial that a contract existed. However it was far from blameless in terms of its own conduct and the evidence which unfolded included much that could be sheeted home by way of legitimate complaint from Aventis. This is also apparent from the more detailed chronology as it unfolds. Aventis' complaints 127 Aventis's complaints are generally put as breaches of the MOU and/or as indicia of what is said to have been an abandonment by both parties of their anterior contractual relationship. 128 Aventis put forward a number of matters in this regard, descending from time to time into its defence of MDA's claims of inappropriate supplier conduct:

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v. if the Court concludes that there is any restriction on Aventis, the quid pro quo comprised an obligation not merely to make the product available, but to actually create sales of the product. Construing the order provision 132 An immediate question arises in terms of what was meant where the MOU recorded that MDA would place an order for the named products "immediately" on the finalisation and signing of the MOU. In my view the text as well as the context, suggests that the parties were agreeing that the prices and quantities 'agreed upon' for 12 months for the named products were as set out. MDA was to place an order for some only of the name products immediately on finalisation and signing of the MOU. The matter is a close one. The words are: "will place an order for the above products". They are not: "will place an order for all of the above products". They are not: "will place an order for the above quantity [or for the entirety of the above quantity] of the above products". 133 The fact that these were prices in quantities agreed upon for a 12 month period supports this construction. The expressed obligation, in terms of pricing and quantity of purchases of the first three named products, was intended to bind the parties for the first 12 months, the parties anticipating that they would be in a position to agree as and when required, on the acceptability or unacceptability of expiry dates in respect of stock to be provided. Clearly there had not yet been, but was anticipated to be, agreement on the fourth named product in terms of pricing and quantity. 134 Having indicated the above construction, I readily concede that the alternative construction could well be correct: namely that the initial order was mandated to be an order for at least the first three named products, with the intent that it be warehoused in Australia pending purchase orders coming in. 135 I do not see that any ambiguity is assisted by any of the pre-contractual conduct disclosed by the evidence. 136 I do not accept that the post contract events are admissible to assist in the construction of the provision: cf Magill v National Australia Bank Ltd [2001] NSWCA 321 per Ipp JA at 50 - 52, applying Bryson J's analysis in Sportvision Australia Pty Ltd v Tallglen Pty Ltd (1998) 44 NSWLR 103 and rejecting the analysis of Santow J in Spunwill Pty Ltd v BAB Pty Ltd (1994) 36 NSWLR 290. What is the necessary content of a distributorship agreement 137 To my mind there is a question which concerns whether or not it was necessary in order for a binding three-year agreement to have included [as the MOU in fact attempted to do in relation to the first three products], identification of pricing and quantity of products across the full three years. 138 Perhaps the question may be tested at by postulating an attempt to create a binding distributorship agreement ["a minimalist agreement"] which would have only the following terms:

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iii. that the distributor was to have exclusive access, not only to named products, but also to all other products of the principal. 139 The question is whether a binding distributorship agreement would be created by use of those terms and no others. Would such an attempt fail as being illusory by reason of being too vague or uncertain, notwithstanding the existence of a clear intent to enter into legal relations?. Would the agreement be necessarily incomplete and/or uncertain.? Are there essential terms of the agreement which remain to be agreed upon? Is the agreement simply void as an agreement to negotiate? 140 Essentially the answer seems to repose in identifying the minimum content of a distributorship contract. But what is such a contract? And what are its essential incidents? 141 A measurement of assistance is to be found in United States Surgical Corporation [sub nom Hospital Product Ltd v United States Surgical Corporation in the High Court: 1984 156 CLR 41]. Mason J [as his Honour then was] at pages 92 - 95, made a number of observations as to the fundamentals of an exclusive distributorship agreement and in particular, observed that such an agreement was not in general, a joint venture in which the parties pooled their resources in an undertaking carried on for their mutual or common benefit [although accepting that it was possible that some aspects of a distributorship agreement may have joint-venture characteristics]. Mason J went on to make the point that where, as there [and as in the present case], the distributorship agreement contemplated that the principal would sell and the distributor would purchase the product, for resale to customers, the distributor, subject to the provisions of the contract, was entitled to set the prices payable on resale, because its profit would depend largely on the difference between those prices and those payable to the principal. In making the resale, the distributor would resell as principal. The distributor in carrying on its business was entitled to make decisions in its own interests, subject to the express terms of the contract. Likewise reference was made to the entitlement of the principal to increase its prices, which may well have a tendency to have effects adverse to the market in which the distributorship agreement was to operate. 142 The essential point was to make clear that even a bald distributorship agreement, entitles the respective parties, subject always to the express provisions of the contract, to make business decisions calculated to advance their own interests. 143 In Australia China Business Bureau Hely J, in dealing with the situation where particular questions concerning product categories were subject to agreement being reached as to matters such as specification, quality and pricing, held that the parties had not intended to be bound in relation to the goods falling within any product category, unless and until they reached agreement themselves on the matters in relation to which a particular process flowchart dealt with required mutual agreement. 144 Whilst the decision is one of some complexity it is convenient to note that his Honour (at [251]) summarised at least one segment of the findings in the following terms:

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"Expressed in this way, the principle of implied terms looks to be based on the need to find terms to which the parties have not adverted but which the law supplies in order to complete the contract for the parties. The qualification in relation to complex commercial contracts reflects the absence of general implications for unique transactions. This may explain what otherwise appears to be an inconsistent proposition, namely, the law does not permit a court to imply terms for the purpose of making incomplete negotiations an enforceable contract. The proposition seems to be based on the view that in order for an implication to be made, the parties must have finally agreed on a bargain. Accordingly, it is not sufficient for a court to be able to identify terms which, if they were implied, would complete an otherwise incomplete agreement. Instead it must be possible to infer-under normal principles governing implication-that the parties impliedly agreed to the matter which has not been the subject of express provisions. Expressed in a slightly different way, where, for example, a contract is silent on matters such as the price or quality of the subject matter of the contract, it must be possible to infer that the parties agreed to a particular standard which a court is capable of implying. Accordingly, an implication of a reasonable price or reasonable quality can only be made if that was the agreement. Mere consistency with the contract is not enough for the simple reason that a court cannot make a contract for the parties." 149 Carter further draws attention to Australian and New Zealand Banking Group Ltd v Frost Holdings Pty Ltd [1989] VR 695 which is another case where there was held to be no enforceable contract where essential terms, including the price, size, style and design of goods to be supplied was not agreed. The court would not imply terms to deal with those matters as there was, in the Court's view, nothing to indicate the basis for implication. 150 To my mind the approach taken by Hely J in Australia China Business Bureau was entirely correct. His Honour appears to have focused upon the significance of complex contractual terms. There is a limit in the extent to which a court can define for the parties, what they ought themselves to have defined, in order to reach agreement. In the present instance this is particularly the case when one takes into account the failure to agree upon prices and quantities for all but the initial 12 months of the term. Finding as to binding agreement 151 In my view the MOU accomplished a limited purpose in that a binding agreement was reached but only for the first 12 months and only in terms of the first three named products. The fact that the parties saw fit to provide for an agreed regime of pricing and quantity for the first 12 months is a most emphatic indicator that the parties did not intend to be bound in the absence of being able to follow suit in terms of reaching like agreements, for the following years. 152 Insofar as the fourth named product was concerned, the parties intended that unless and until they agreed upon pricing and quantity, that product be excluded from the ambit of the initial 12 month period arrangement 153 I do not see that the necessity for the parties to agree upon expiry dates, renders that portion of the MOU uncertain or void, as an agreement to agree. I would read into the MOU an implied term that the product supplied would require to have a reasonable shelf life in terms of marketability. 154 In the result the parties are seen to have reached a limited agreement operative for the initial 12 months in respect of which Aventis had granted to MDA an exclusive distributorship agreement covering the initial three products. 155 The parties obviously intended that during the initial 12 months term they would be in a position to agree upon prices and quantities to be operative for the following 12 months and in due course for the final twelve months of the initial term. They were obviously content to go forward, anticipating that the missing detail, in respect of the products and pricing and quantities, would be the subject of further agreement. 156 Arguably the route to the above finding is simply that of construing the MOU. Reference has already been made to the parties being the masters of their contractual fate. That is exactly what has happened here. The express reference to prices and quantities included in the MOU makes relatively transparent what was the intent. If it be necessary to approach the analysis by an implied term route, the same result follows. It was clearly an anticipation of the parties that they would in fact be able to agree upon matters such as price and quantity of product. It was an implied term of the MOU, that in the absence of being in a position to so agree, the parties intended that their exclusive distributorship agreement would no longer be binding upon them 157 The extent to which the agreement that MDA would have exclusive access to all plasma products of Aventis [otherwise than the four named products] was enforceable is unnecessary for present decision. Likely that segment of the MOU could not be binding unless and until the necessary definition came forward in a consensual fashion. The exclusive access provision had to be tethered to a binding agreement. It could not survive in vacuo. Such a provision could endure only as attached to so much of an agreement as proved to be enforceable. The parties anticipated that form of agreement coming forward, but until it did, this provision could not be enforced. 158 It is strictly unnecessary to go further in terms of determining the issues in this case. The fact is that on the evidence there never was agreement reached in terms of identification of prices and quantities for products following the initial 12 month period. The agreement insofar as binding the parties for the first 12 months, simply ceased to bind them at the end of the initial 12 month period. Alternative analysis 159 However before continuing it is appropriate to recognise MDA's case in terms of the posited minimalist binding distributorship agreement which would have only the terms earlier hypothesised. 160 A mainstay of MDA's case is that such a minimalist distribution agreement constitutes a bargain which effectively binds the principal [which renders itself unable to distribute within the territory otherwise than through the distributor]. The proposition is that this inhibition would mark the obviously intended need for the parties to be able to agree upon such matters as price and quantity and the like. Effectively the contractual bargain would be akin to a conventional right of first refusal. The proposition is that this would have been seen by the parties as placing tremendous emphasis on the need for the parties to be able to later agree on matters such as price and quantity. The proposition is that there would be considerable advantages and very little disadvantages to either party in carrying out their best efforts to so agree. Hence MDA's contention would presently, if accepted, have the result that such a contract would be binding from its commencement. Applied to the present circumstances that contention may have led to a holding that the agreement would continue even after the initial 12 months and even in the absence of any further agreement as to price and quantity of product. 161 The case so sought to be made is flawed by reason of:

[200]

ii. it failed to identify the terms of the agreement to come into effect upon the exercise of the option. 164 An exercise of the option would have occurred in the absence of any agreement or discussion whatever concerning prices for the further term. The purported exercise of the option could only be devoid of content in the absence of agreement as to essential matters. The way forward 165 The curious situation which obtains concerns the fact that notwithstanding from time to time in later years having contested the validity of the MOU, Aventis prior to the purported exercise by MDA of the option, appears to have affirmed that the MOU was on foot. As a matter of law it was wrong. The MOU had ceased to bind the parties at the expiration of the initial 12 month term. 166 In a conveyancing context it is possible for a vendor, having first purported by notice to make time of the essence of a contract and thereafter purported to terminate the contract for failure to comply with the time so delimited, to then, without prejudice to the claimed validity of the termination, give a second notice purporting to make time of the essence of the contract. Such a second notice is properly construed as an "offer to start up again" [that is to say as an offer to re-instate the contract, being an offer capable of being accepted by the purchaser]: Lohar Corporation Pty Ltd v Dibu Pty Ltd (1976) 1 BPR 9177. 167 The present context however is quite different. There was no communication from Aventis by way of an offer to start up again. To the contrary, its approach as the end of the initial term approached, was to give notice terminating the MOU effective on 24 August. 168 The relationship had always been stalled. It remains stalled. The notice terminating the MOU was simply misconceived. The agreement had long since ceased to have operative binding effect. It had ended at the expiration of the initial 12 month period. 169 Returning briefly to the concerns or the courts to strive to uphold an agreement where the parties clearly intended to enter into an immediately binding agreement and believed they had done so on the principle that the Court's should be the upholders and not the destroyers of bargains, this has been a particularly difficult case to deal with. That the parties, notwithstanding their appearing to approach one another at arms length through most of the first three year period [when they remembered to communicate at all], seemed to pay lipservice to the proposition that they had an agreement of some type in place, simply means that the Court has to scrutinise very carefully the approach taken by each of them on the pleadings. Notably no party contended that the original contract had, as a matter of law, been varied by conduct, following the end of the initial 12 month period. No pleading advanced the proposition of an estoppel based on a conventional acceptance by the parties of some form of varied agreement. Doubtless that was because of the lack of content to the terms of a variation. 170 As already observed in the result the parties having been 'the masters of their contractual fate', were themselves responsible for the limited 12 month life of the binding arrangement recorded in the MOU. Abandonment 171 That a contract can be terminated by an abandonment is not in issue as one is reminded by the judgment of Hope JA in Air Great Lakes Pty Limited v K S Easter Pty Limited (1985) 2 NSWLR 324. 172 During the hearing Aventis sought leave to amend its pleadings so as to plead abandonment. The amendment was opposed upon the basis that MDA had not prepared its case in those terms and would have required to carry out additional investigations in order to be fairly able to deal with that case. A decision was reserved to be handed down in the final judgment. 173 It seems to me that the amendment should be allowed for the reason that every facet of the dealings between the parties seemed to have been thoroughly treated with in preparation for the hearing. No new facts were put forward by Aventis. In particular I do not accept that internal communications of Aventis would have been relevant to the issue. Abandonment takes place where the parties are seen so to have conducted themselves as mutually to abandon or abrogate it. 174 In Summer v The Commonwealth (1918) 25 CLR 144 Isaacs J held that the contract the subject of the proceedings before him had been mutually abandoned by the conduct of the parties. The contract was for the supply of blocks of marble. Each party adopted a different view as to what the seller was bound to do in performance of the contract. After months of disputation the purchaser purported to give a notice of cancellation of the contract, which Isaacs J held to be ineffective. Having so concluded his Honour said:

[202]

Whatever the terms of a contract may be, it is possible for the parties so to conduct themselves as mutually to abandon or abrogate it... In my opinion that is the legal position here. Informally, but effectively the parties have so acted in relation to each other as to abandon or abrogate the contract." 175 Bearing in mind the manner in which the primary findings have approached the analysis, it is unnecessary to deal with the abandonment defence. The contract fell away after the initial 12 months by reason of its terms, whether express and/or implied. It was no longer in force thereafter. The concept of abandonment would only have required consideration if there had been a binding contract to be abandoned. There was not. Affirmation 176 I do not accept that Aventis has been shown to have elected to confirm the MOU by supplying MDA's five orders [two in February 2004 and three in June 2004 -August 2004]. The only conduct pleaded by MDA as amounting to affirmation by Aventis was the making of those five sales in 2004. The making of a sale was not unequivocal conduct consistent only with the MOU being on foot. Cross-claim 177 As was conceded during final address by Mr Parker, the cross-claim insofar as constituting a claim to Trade Practices Act/Fair Trading Act s 87 relief was always a shield and no more. It constituted a claim to damages of an equivalent amount to that which may have been awarded against Aventis in the event that MDA had succeeded in its claims on damages. 178 For that reason the cross-claim grounded upon the basis must fail. 179 There are a number of answers to the cross-claim insofar as it seeks damages for the alleged breach by MDA of the contract to acquire the first three named products in the initial 12 months of the term. 180 The finding is that Aventis has failed to prove its damages claim. Aventis has failed to prove on the balance of probabilities that had MDA complied with its contractual obligation to order the first three named products in the quantities provided for in the MOU, it would have been able to produce and provide those products consistently with such orders. The evidence before the Court of the very significant delays that were involved in Aventis providing MDA with even the small orders in fact placed during the year, highlights the significance of Aventis discharging the onus of proof of having been in a position to both manufacture and/or supply the product which ought to have been ordered during the initial 12 months of the term. Aventis has not discharged that onus of proof. 181 There is yet a further obstacle in the path of Aventis in its endeavour to prove its damages case. The analysis in Exhibit D6 where Mr Ho sets out the damages calculation, effectively derives a gross profit figure rather than a net profit figure. Mr Ho gave evidence that he had no precise knowledge of what costs were included. There is simply no, or no satisfactory evidence that describes effectively the indirect costs associated with the manufacture and supply of the subject products. The presumption against the wrong doer principle referred to below works in two ways - first in an expansive approach to damages against the wrong doer, and second, in a careful scrutiny of a claim to damages pursued by a wrong doer. Hence for this reason also the damages case pursued by Aventis fails. 182 A further obstacle in the path of Aventis' claim to damages in respect of MDA's failure to acquire the stipulated quantities of the first three identified products during the initial 12 months of the term is to be found in the finding that the conduct of Aventis during the initial 12 months of the term played a significant part in explaining MDA's failure to acquire the products. As already noted in the reasons:

Darryll Cullen v ZLB Behring LLC

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