Franklins Pty Ltd v Metcash Trading Ltd

Supreme Court of NSW|2007-05-04|Before: Palmer J, Bergin J

CITATION : Franklins Pty Ltd v Metcash Trading Ltd (No 2) [2007] NSWSC 446

JURISDICTION : Equity Division Commercial List

DECISION : Orders, including declarations, made.

CATCHWORDS : PRACTICE AND PROCEDURE - Whether orders should include declarations, although not originally sought - whether declarations would have utility.

LEGISLATION CITED : Civil Procedure Act 2005 (NSW) - s.56 Uniform Civil Procedure Rules 2005 (NSW) - 36.1

PARTIES : Franklins Pty Ltd - Plaintiff Metcash Trading Ltd - Defendant

COUNSEL : L.G. Foster SC, Ms S. Fendekian - Plaintiff J.B. Simpkins SC - Defendant

SOLICITORS : Blake Dawson Waldron - Plaintiff Freehills - Defendant

50018/05 Franklins Pty Ltd v Metcash Trading Ltd (No 2)

1 I delivered reasons for judgment in this case on 21 March 2007 and stood the proceedings over for a short time to enable the parties to bring in Short Minutes of Order. The parties disagree as to the form of the orders to be made. 2 The broad issues for determination in the proceedings were the true construction of the Supply Agreement and - if that issue were decided adversely to Metcash - whether the Supply Agreement should be rectified. 3 On 29 July 2005, in the course of case management, Bergin J made an order under Pt 31 SCR for the trial of separate questions. The separate questions were not formulated at that time but her Honour's reasons for judgment make it clear that the questions would determine what was the agreement between the parties before the Court went on to determine whether the agreement had been breached. 4 The trial commenced on 11 September 2006 but the separate questions ordered by Bergin J more than a year before had not been formulated. The parties were still in dispute about them. It was only on the fourth day of the trial that, with very evident reluctance and difficulty, the parties managed to produce a document setting out Issues for Determination: MFI 2. 5 In my reasons for judgment, I treated the Issues for Determination as the formulation of the separate questions ordered by Bergin J, and I proceeded to answer each one of them. By my answer to Questions 6 (judgment para 40), 7 (judgment para 77), 10 (judgment para 80), and 11 (judgment para 81), I held that the construction of the Supply Agreement advanced by Franklins was correct. By my answer to Question 14 (judgment para 183), I held that the Supply Agreement ought to be rectified as sought by Metcash. 6 The order for rectification of the Supply Agreement foreshadowed in paragraph 183 of my judgment was made on 2 April 2007, in accordance with Short Minutes of Order prepared by Metcash. Pursuant to the slip rule, that order was amended on 24 April 2007. 7 On 24 April 2007, Franklins propounded Short Minutes of Order setting out, in effect, the answers which I had given to the Issues for Determination. The form of the orders should have been uncontroversial; nevertheless, the parties are in dispute about them. 8 In its proposed Short Minutes of Order, Franklins has incorporated in the answers to Questions 7, 10, 11 and 19 the relevant words of the question to be answered, but it has added words indicating that a declaration in terms of the answer is to be made. 9 So, for example, Question 7 asks: "Whether upon the true construction of the formal Supply Agreement [Franklins] was obliged to pay a Purchase Price that was calculated by deducting any applicable Case Deals and Ullage Allowances from and adding Profit Margins, Service Fees and any applicable GST to a Wholesale Price being:

(b) the Supplier's wholesale list price for the Product in the State or Territory in which the Business was located at the time of [Metcash]'s delivery of that Product to [Franklins] less 'warehouse allowances' and 'trade, distributor and cash discounts' provided to [Metcash] by that Supplier; or

(c) the Supplier's wholesale list price of the Product in the State or Territory in which the Business was located at the time of [Metcash]'s delivery of that Product to [Franklins] less all 'allowances' and 'discounts' (including rebates) provided to [Metcash] by that Supplier." 10 One could not answer this question with a simple "yes" or "no"; it would not provide a self-contained answer to the question or a self-contained order of the Court merely to say "the answer to Question 7 is as in paragraph (c)". A self-contained order would have to adopt the opening words of the question and go on to repeat the words of sub-paragraph (c). 11 This is what Franklins has done in its proposed Short Minutes of Order, with the addition of the words which are underlined: "The Court answers this question by holding that, upon the true construction of the Supply Agreement, the plaintiff was obliged to pay a Purchase Price that was calculated by deducting any applicable Case Deals and Ullage Allowances and adding Profit Margins, Service Fees and any applicable GST to the Wholesale Price being the Supplier's wholesale list price of the Product in the State or Territory in which the Business was located at the time of the defendant's delivery of that Product to the plaintiff less all 'allowances' and 'discounts' (including rebates) provided to the defendant by that Supplier and by further holding that a declaration to that effect should be made . The Court notes that the above holding reflects the construction propounded in sub-par (c) of Question 7 ." 12 Franklins' proposed Short Minutes of Order go on to incorporate a declaration which begins: "The Court declares that upon the true construction of the Supply Agreement: …". The following three paragraphs accurately record the construction which I placed on the terms of the Supply Agreement, in its unrectified form. Paragraph 6 of Franklins' Short Minutes of Order contains a declaration as to Franklins' rights under the Supply Agreement to inspect records. The substance of the declaration is the answer which I gave to Question 19, in paragraph 199 of the judgment. 13 On 24 April 2007, I directed the parties to deliver written submissions as to whether the Short Minutes of Order proposed by Franklins should be made. Because of the state of my list, my pending absence on leave, and a pending appeal commenced by Franklins, it was highly desirable that I make orders by 4 May. Metcash delivered its written submissions on 1 May; Franklins delivered its written submissions on 3 May. Later, on 4 May, Metcash delivered further written submissions in response to Franklins' submissions. Metcash's submissions in response were delivered without the leave of the Court. In the interests of giving a decision today and in accordance with the Court's usual practice, I have not read the second set of submissions of Metcash which were delivered without leave. 14 Metcash's written submissions are seventeen pages in length; Franklins submissions in response are fourteen pages. As I explained to the parties on 24 April, if my judgment is to be given today, my reasons must be brief. 15 I have reduced the contentions of the parties to their fundamentals. Metcash opposes the making of the declarations proposed by Franklins' Short Minutes of Order because:

such declarations were not expressly sought in Franklins' prayers for relief in the Statement of Claim;

Metcash says the declarations are unnecessary and lack utility;

Metcash says the declarations are misleading. 16 Franklins responds that:

although the declarations were not expressly prayed, under UCPR 36.1 the Court may make them if "the nature of the case requires" ;

the declarations are not misleading. 17 I accept that the Court may, under UCPR 36.1, make the declarations even though they were not originally prayed. In determining whether "the case requires" the making of the declarations, I have regard to the overriding purpose of the Civil Procedure Act 2005 (NSW), as expressed in s.56, of facilitating "the just, quick and cheap resolution of the real issues" in the case. 18 Franklins has appealed against the rectification order which I have made. Metcash may cross-appeal against the answers to the separate questions concerned with the construction of the unrectified Supply Agreement. The making of the declarations as sought will enable the Court of Appeal to find in one convenient place the construction which I have placed on the relevant clauses of the Supply Agreement, in its unrectified form. If Franklins' appeal against the rectification order succeeds and there is no cross-appeal by Metcash, or if Metcash's cross-appeal fails, the declarations as to the construction of the unrectified Supply Agreement will facilitate the determination of the remaining issues in the proceedings, which depend upon ascertainment of the terms of the Supply Agreement. Accordingly, the declarations have utility and tend to promote the just, quick and cheap resolution of the issues in the proceedings. 19 Metcash says that the declarations as to the construction of the Supply Agreement contained in paragraphs 3, 4 and 5 of the proposed Short Minutes of Order are misleading because they do not reflect my conclusions as to what the Supply Agreement, as rectified, provides. 20 The declarations in paragraphs 3, 4 and 5 of the proposed Short Minutes of Order are, clearly, to be read in the light of the rectification order made on 2 April 2007. The declarations in those paragraphs refer to the Supply Agreement in its unrectified form. However, in the probably vain hope of removing one unnecessary issue from further debate, I will insert in paragraph 3 after "Supply Agreement" the words "(in its unrectified form)". 21 With this amendment, I make orders in the form of the Short Minutes of Order proposed by Franklins, initialled by me and placed with the papers. I will hear any submissions as to costs at a time to be fixed.
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