Gough & Gilmour Holdings Pty Ltd and ors v Caterpillar of Australia Ltd and anor

Gough & Gilmour Holdings Pty Ltd and ors v Caterpillar of Australia Ltd and anor - [2003] NSWIRComm 173 - NSWIRComm 1995 case summary — Zoe

[12]

9 In the primary judgment, the Court found in relation to the issue of unfairness, as follows: 786 In considering whether the contracts and/or arrangements between the applicants and respondents in these proceedings were unfair within the meaning of s 106, there are a number of relevant matters that I have had regard to, including the following: 1. The second and third applicants were experienced businessmen and possessed a close working knowledge of Caterpillar and its system of dealerships. Messrs Gough and Gilmour were aware of the lucrative nature of Caterpillar dealerships and were very keen to purchase the Waugh & Josephson dealership. 2. The second and third applicants entered into the dealerships with their eyes open and with the assistance of legal, accounting, financial and corporate advisors. They were aware that they were required to sign standard form contracts. They were aware of the without cause termination provisions in the dealership agreements. Nevertheless, their expectation upon entering into the dealership agreements was that the agreements constituted long term, secure arrangements. 3. At the time of entering into the dealership agreements the second and third applicants were aware that Caterpillar reserved the right to select its dealers and that dealerships could not be bought and sold. Further, that because of the without cause termination provisions Gough and Gilmour were aware that there was no goodwill attached to the dealership. 4. The second and third applicants were very successful in building up the dealership into a profitable business. They invested substantially in the business on an ongoing basis. 5. The first applicant acquired the Caterpillar dealership business with an investment of $7 million. It has achieved returns on its investment in the dealership business in the period from 1989 to 2000 totalling $97.4 million. The pre-tax return for this period totals $142.2 million. The after-tax returns achieved by the first applicant on its investment in the dealership business over this period have averaged 34 per cent per year. The pre-tax return for the same period has averaged 45 per cent. 6. The total return received by Gough from 20 February 1989 to 30 June 2000 was $130.59 million, assuming a value of his shareholding at 90 per cent of the value of the offer by WesTrac of 26 March 2001 (assessed at $116.35 million). 7. The total return received by Gilmour over the period from 20 February 1989 to 30 June 2000 was $16.74 million which sum includes a calculation of the value of his shares on a sale to WesTrac calculated as 10 per cent of the $116.35 million figure. 8. Characteristic of relational contracts, essential elements of the relationship between the applicants and the respondents were mutual trust, confidence, respect, cooperation and open communications. 9. There was a history of relationship problems throughout much of the time the second and third applicants had been dealer principals and there was a lack of mutual trust, confidence, respect, cooperation and open communications between the parties. 10. There was an inability to cooperatively and expeditiously work through business issues and differences. 11. The applicants' conduct and adversarial attitude towards the first respondent placed a continuing strain on the relationship between the applicants and the first respondent and undermined the maintenance of trust, confidence, respect and cooperation between the applicants and the respondents. 12. The first respondent contributed to the breakdown in the relationship between the applicants and the respondents, especially through its failure to properly address relational issues early in the relationship and through its culpability in the TEPS, RPI and Cadia disputes. However, it did not display by its conduct a sustained and wilful disregard for the importance of cooperation, trust and confidence in the relationship, such disregard being characteristic of the applicants' conduct. 13. The first respondent had proper grounds to recommend in March 1999 to the second respondent that the relationship with the applicants be brought to an end. However, in failing to give the applicants notice of its recommendation and in light of its conduct in using material to support its recommendation that it had assured the applicants would not be used, and its conduct in misleading the second respondent in respect of the basis for the recommendation (i.e., poor performance as well as loss of trust and confidence), the first respondent acted unfairly and inconsistently with its "last resort" policy, which involves dealers being given every reasonable opportunity of remaining as a Caterpillar dealer.

[69]

29 Schedule B (according to the revised edition submitted by the applicants) involves a variation ab initio to the overall arrangement as found by the Court in its primary judgment. Because of its central importance I have set out Schedule B in full below: Schedule B For the purposes of this schedule the parties thereto are referred to both individually and jointly as follows: (1) Gough & Gilmour Holdings Pty Limited, Harcourt David Gough and Anthony Lansley Gilmour - " Gough & Gilmour "; and (2) Caterpillar of Australia Limited, Caterpillar Inc, Caterpillar SARL and Caterpillar Overseas Credit Corporation SA - " Caterpillar ". The Overall Arrangement (and/or the Agreements) be and is hereby varied ab initio so as to insert the following terms: 1. Caterpillar's right to terminate the dealership agreement is conditional upon Caterpillar first complying with the last resort policy. 2. Accordingly, Caterpillar shall: (a) take all reasonable steps to arrest any perceived decline in the relationship with, or the performance of, Gough & Gilmour so as to avoid the prospect that the dealership or dealership relationship might decline to such a level that there was no option but to terminate. Such steps shall include full compliance with clause 10 hereof; (b) take all reasonable steps with a view to keeping the dealership on foot, including full compliance with clause 11 hereof; (c) in the event that all reasonable steps have been taken with a view to keeping the dealership on foot but have proved to be unsuccessful, Caterpillar will provide Gough & Gilmour with a proper opportunity to sell their shares in the dealership business and will assist Gough & Gilmour receive fair value for those shares in that business by: (i) ensuring that the sale process is conducted in an amicable and reasonable basis without duress; (ii) permitting the applicants to enter discussions with other potential dealer candidates on a "what if" basis to enable the applicants to assess fair value; and (iii) requiring the preferred dealer candidate to accept a dispute resolution mechanism to deal with any deadlocks and/or breakdowns in the negotiations, as a condition of being selected as the preferred dealer candidate. Such steps are to be taken prior to the issue of any notice of termination pursuant to the Agreements; and (d) not issue a notice of termination until it is satisfied that the material said to support the termination is complete and accurate and that Gough & Gilmour has been given a proper opportunity to comment on that material. Furthermore, Caterpillar shall not: (i) seek to rely on any report on Gough & Gilmour's performance or the state of its relationship with Caterpillar to support a recommendation of termination, in circumstances where an assurance has been given that any such report will not be relied upon at all; and (ii) use the act or timing of the issue of a termination notice for an improper purpose, such as would seriously weaken Gough & Gilmour's bargaining position in any sale process. 3. In the event that notice of termination is issued by the respondents in breach of clause 2 hereof then that notice will have no force and effect ("defective notice"). 4. If, for whatever reason (eg consent or order of the Court) the Agreements remain on foot beyond the notice period specified in the defective notice then such Agreements can only be terminated by the issue of a further notice of termination in accordance with clause 5 hereof.

[70]

Any such further notice of termination other than for serious and wilful misconduct shall be for a period of 5 years (60 months) or until settlement of the sale of the shares in the dealership business (whichever occurs first) provided that:- (a) in the event of irretrievable breakdown in the relationship the respondents shall have, at the end of the first 15 months of that period, the option of permitting the applicants to work out the balance of that period or of terminating the relationship by paying the applicants a sum to represent the anticipated profits the applicants would have earned during the balance of that notice period; and (b) in the event that no sale of the dealership business results from the sale process contemplated by clause 6 hereof, Caterpillar agrees to continue to supply Gough & Gilmour all parts, technical information, support programs (currently in existence or that may be developed) for all relevant equipment under guaranteed cost ( "FOCUS" ) contracts as will enable Gough & Gilmour to continue to comply with those contracts after the termination of the dealership. 6. In the event that such a further notice of termination does issue then: (a) the respondents shall provide the applicants with a proper opportunity to sell the dealership and will assist the applicants to receive fair value for the shares in the business by ensuring that the sale process is conducted on an amicable and reasonable basis without duress; and (b) any such sale process shall commence within 4 weeks of the issue of the further notice of termination and unless otherwise agreed between the parties, shall be concluded within 30 weeks thereof; and (c) if Gough & Gilmour is unable to sell the dealership business to Caterpillar's preferred dealer candidate within the period specified in (b) hereof, then subject to the operation of clause 9 hereof, Caterpillar shall immediately offer to purchase the shares in the dealership business solely by reference to its fair value as at September 30, 2000. 7. For the purpose of the sale process contemplated in 6(a) and (b) hereof: (a) the preferred dealer candidate selected by Caterpillar to negotiate with Gough & Gilmour will, as a condition of such selection, agree to abide by the dispute resolution mechanism set out in clause 9 hereof; and (b) Caterpillar will not at any time whilst that sale process is in progress: (i) approach, solicit or entice employees or contractors of Gough & Gilmour to terminate any contract or arrangement between such employees or contractors and Gough & Gilmour; (ii) approach, solicit or entice any person to terminate, withdraw from or substitute any contract with Gough & Gilmour for the supply of any machine, part, product or other equipment referred to in the Agreements; (iii) approach, solicit or entice, for the purpose of having the effect of causing loss or damage to Gough & Gilmour, any person to refrain from entering into any contract with Gough & Gilmour for the supply of any machine, part, product or other equipment referred to in the Agreements; (iv) enter into any Sales and Service Agreement; Distribution Agreement; or Product Support Agreement for the supply of any machine, part, product or other equipment referred to in the said Agreements relating to New South Wales and/or the Australian Capital Territory, with any other person or entity; and (v) procure or encourage any person to establish any infrastructure or operations in New South Wales and/or the Australian Capital Territory in preparation for, or for the purpose of, exercising contractual rights of the kind referred to in the Agreements, on any basis other than by acquisition of the business of Gough & Gilmour; 8. [Deleted] 9. The following dispute resolution mechanism shall be utilized: (a) in the event that the sale process becomes deadlocked and/or breaks down, then provided they are agreeable to accept the role on the understanding that they are engaged in their personal capacity, given their particular skills, knowledge and experience, and not as representatives of the parties to the negotiations or of Caterpillar, Don Coonan and Jim Owens (or such other person or persons that may be acceptable to both Gough & Gilmour and Caterpillar) ( "the Umpires" ) will be engaged to conciliate and/or mediate the dispute between Gough & Gilmour and the preferred dealer candidate. (aa) in the event that no person or persons acceptable to both Gough & Gilmour and Caterpillar to become an Umpire or the Umpires can be agreed on then, provided that the grounds for any refusal to agree to accept the nominated person(s) are not unreasonable, the sale process is concluded and the relationship between Gough & Gilmour and Caterpillar will terminate in accordance with the notice issued pursuant to clause 5 hereof less the period of time expended on the sale process. (b) in the event that no sale agreement arises from the conciliation and/or mediation pursuant to clause 9(a) then Gough & Gilmour and the preferred candidate agree that the Umpires will have, inter alia, the power: i. to decide appropriate principles to be applied for the purposes of settling any issues between the parties; ii. subject to paragraph (c) below, to make final and binding decision(s) resolving the outstanding issues between the parties. (c) in the event that the Umpires: (ii) agree that it is either not possible or not appropriate to exercise their powers to make final and binding decision(s) to resolve the outstanding issues between the parties, then they are at liberty to decline to make any such final and binding decision(s) provided they give reasons for their decision to do so; (iii) are unable to agree on the matters in clause 9(c)(i); then the sale process, subject to paragraph 9(d)(ii) below, is concluded and the relationship between Gough & Gilmour and Caterpillar will terminate in accordance with the notice of termination issued pursuant to clause 5 hereof less the period of time expended on the sale process, (ca) in the event that the Umpires are unable to agree on final and binding decision(s) resolving any outstanding issues, the sale process is concluded and the relationship between Gough & Gilmour and Caterpillar will terminate in accordance with the notice issued pursuant to clause 5 hereof less the period of time expended on the sale process; (d) in the event that the reason for declining to make a decision pursuant to clause 9(c)(i): (i) is that the approach of Gough & Gilmour in the sale process revealed a lack of good faith and/or reasonableness, then the sale process is concluded and the relationship between Gough & Gilmour and Caterpillar will terminate in accordance with the terms of the notice of termination issued pursuant to clause 5 hereof less the period of time expended on the sale process; or (ii) is not based on belief that the approach adopted by Gough & Gilmour in the sale process revealed a lack of good faith and/or reasonableness, then Caterpillar will immediately offer to purchase Gough & Gilmour's dealership business in accordance with clause 6(c) hereof. (e) In the event that the Umpires do not provide reasons pursuant to clause 9(c)(i), the sale process is concluded and the relationship between Gough & Gilmour and Caterpillar will terminate in accordance with the notice issued pursuant to clause 5 hereof less the period of time expended on the sale process. Relationship Management 10. For the purposes of maintaining a sound and workable relationship between Gough & Gilmour and Caterpillar, the following guidelines will apply, namely: (a) the parties will meet from time to time, but in any event not less than once each year, with a view to discussing any concerns that either party may have about the level of trust, respect, or cooperation between the parties; (b) to the extent that it is necessary or appropriate to do so, the parties will establish such guidelines or other ground rules designed to address any such perceived problems in the relationship and to minimise the prospect that they will recur in the future; (c) given that major changes in Caterpillar's system of operation, and its policies and guidelines concerning important operational issues, will have a direct impact on Gough & Gilmour and, if managed inappropriately, could result in relationship difficulties, the following guidelines will be adhered to by Caterpillar, namely: (i) Caterpillar will provide advance warning to Gough & Gilmour of any major changes to the system of operation or to any existing policy or guideline that will or may have an impact on Gough & Gilmour; (ii) Gough & Gilmour will have the opportunity to seek further information and engage in consultation with Caterpillar prior to its implementation of any such major changes; (iii) Caterpillar will make genuine attempts to take into account Gough & Gilmour's reasonable requirements when considering whether any such major changes should be introduced; (iv) Caterpillar will maintain clear policies, procedures and codes of conduct in relation to those aspects of its operation which impact on Gough & Gilmour (for example, RPI audits and invoicing policies) and will provide Gough & Gilmour with an opportunity to constructively discuss the impact of those policies and procedures on Gough & Gilmour. (d) in the event that Caterpillar perceives there to be ongoing relationship issues in spite of proper efforts being taken in accordance with (a)-(c) above, then Caterpillar will immediately provide Gough & Gilmour with written notification of what Caterpillar regards to be unacceptable behaviour or approaches on the part of Gough & Gilmour and, where appropriate, warnings as to the possible or likely consequences of any continuation of that behaviour or those approaches. Improvement Plan 11. If Caterpillar holds a serious concern that relationship difficulties it has with Gough & Gilmour may require consideration be given to terminating the dealership, then: (a) Caterpillar will implement an improvement plan as set out in (b) below; (b) the improvement plan is to include the following components: (i) the relationship problems in which improvement is sought are to be clearly identified and described; (ii) methods of bringing about improvement and evaluation of improvement are to be agreed between the parties; (c) the improvement plan is to be pursued over a period of 12 months, or for such other period as may be agreed between the parties; and (d) Gough & Gilmour will be given the opportunity to complete the plan before a recommendation is made within Caterpillar for the termination of the dealership or any exercise of its right to terminate the Agreements. 12. All of the above provisions are to operate notwithstanding any provision to the contrary in the Agreements or any notices of termination already issued. 13. Notwithstanding the terms of clauses 1, 2, 10 and 11, in the event that Caterpillar has not complied with its obligations under those clauses by 25 October 2000, then the remedy of Gough & Gilmour for any such non-compliance will be confined to claim(s) for compensation or damages. 30 It may be seen from the foregoing that by way of alternative relief the applicants are seeking: · a notice period of 5 years to terminate the dealership agreements; · a sale process requiring the assistance of the respondents during negotiations and in terms which are said to be consistent with the Fourth Assurance; · an element of the sale process requiring the respondents to acquire the shares at an independently determined value in certain circumstances, i.e. a buyer of last resort provision; · prohibitions on the respondents engaging in certain conduct during the sale negotiation process; · a dispute resolution procedure to operate in relation to the sale process; · relationship management and improvement plan provisions imposing restraints on the ability to issue notices of termination without first undertaking certain procedures whereby notice is given to the applicants allowing them opportunities to respond and remedy any issues raised; · allowing the applicants to negotiate with, and/or sell the dealership to, a party other than the party selected by the respondents as the preferred dealer candidate; · allowing the applicants to negotiate with other possible dealer candidates. PRELIMINARY MATTERS

[124]

74 As to the category of amendments reserving the rights of the applicants to amend the summons to reflect any further findings of the Court, the applicants submitted: (a) Apart from the fact that the Court has expressly indicated that it has not yet completed phase 1 of these proceedings, the Judgment is to be properly characterised as an interlocutory judgment as opposed to a final Judgment. (b) There can be no suggestion that the Court is somehow " functus " or that it is subject to doctrines of res judicata , issue estoppel or Anshun estoppel. (c) The Respondents had cited no authorities to support the contention that the Court cannot add to or supplement its Judgment. (d) The mere fact that a split hearing was ordered does not place the Court in a "strait jacket" with respect to the future management of the case in the event that, through changed circumstances or otherwise, the Court decided to manage the case in a different way than was originally proposed (subject of course to acting "judicially"). In this regard, it is to be noted that both parties asked the Court for an opportunity to be heard on the question of alternative relief before any final decision was made in connection with phase 1 of these proceedings and the hearing that had just taken place is a reflection that joint reservation of position. That is, phase 1 of the proceedings, was, in fact, split into two parts and the Court has expressly indicated that the evidence is not yet closed. In such circumstances, it is difficult (if not impossible) to see how it could be said that the Court was prevented from making such further findings of unfairness or otherwise as it might see as appropriate in the present circumstances. This is a fortiori in circumstances where both sides have referred to evidence called in the proceedings that was not dealt with in the Judgment. (e) The Court could not, for instance, be prevented from making any further findings on matters that it had (for whatever reason, ie oversight or otherwise) not dealt with fully or at all in the Judgment. The Applicants submit that the issue of the fairness or otherwise of a goodwill payment to the Applicants on the termination of the Agreements is in such a category.

[129]

78 The respondents contend that the applicants' "protective regime" is wrongly premised on a right to sell the dealership on an open market to achieve market value and is "nonsensical" in that the respondents are required, under the buyer of last resort mechanism, to purchase property rights which they always held. 79 For the reasons later expressed, the Court does not propose to vary the overall arrangement to provide for a buyer of last resort provision. However, the Court does propose to provide the applicants with a further opportunity to sell their interests in the dealership. In the event a sale does not occur the issue arises as to whether the applicants had accumulated goodwill during their tenure and, if so, whether the Court should make money orders for the loss of the value of the accumulated goodwill in the dealership. In this respect, the applicants submitted: Whilst the Court found that the Applicants were aware, on entering the Agreements in 1989 that there was no goodwill attached to those Agreements, such a finding does not provide a complete answer to the claimed unfairness associated with the Respondents being able to issue notices of termination (some 12 years later) without any level of compensation for the accumulated/trading goodwill undoubtedly generated by the Applicants by their efforts in investing in and growing a business. Furthermore, whilst the Respondents have placed great reliance on the Court's acceptance of Bryant's approach and methodology, it is clear that Bryant was valuing the business by reference to the Agreements themselves and on the assumption that the Respondents' termination right was unconditional. The Court has found that the termination right was subject to the Respondents' " last resort " policy (see: paragraph 780(27) of the Judgment) and that the parties shared a mutual expectation as to security/longevity (see: paragraphs 155 and 786(2) of the Judgment). In light of such findings, the Applicants clearly had a real "interest", of value, that not only supports a conclusion as to the existence of accumulated/trading goodwill but also supports the introduction of a regime that would protect that interest. It should also be noted that the Applicants claimed … that "if the Court" concluded that there was no goodwill attached to these Dealership Agreements the: … Court should find that such a situation is in fact unfair and unconscionable and vary the contract to correct the situation (ie such that it be clear that compensation for trading goodwill is payable to an outgoing dealer, if not by the purchaser, then by the Respondents themselves if no sale has been possible following reasonable efforts on the part of the outgoing dealer) - especially if any such dealer is being forced out without cause.

[137]

86 In its primary judgment the Court addressed the termination clause in the dealership agreements. At pars[661] to [666] the Court said: 661 In relation to the 90 days' period I accept the respondents' contentions that: a) Even if it could be said that the applicants had made extraordinary investments then consistent with the principles in Crawford Fitting, the applicants have had ample time to recover that expenditure. In any event if the sale had proceeded or does proceed it seems to me the expenditure will be recovered; b) If the sale to WesTrac had proceeded or proceeds on the basis agreed then, as a matter of law, all employment contracts, commercial contracts and leases etc., between the first applicant (or any of its subsidiaries) and third parties will remain on foot and be unaffected. Further, the documentary evidence establishes that, in any event WesTrac expects to employ additional labour and the affidavit and oral evidence confirms security of employment. 662 It seems to me, however, that 90 days is an inordinately brief period to wind up the affairs of the business the size and complexity of the applicants' dealership. If 90 days' notice had been given to the applicants in June 1999 rather than the making of a request to sell their interests in the dealership, that period of notice would have been patently inadequate - even on the basis of Curfman's expectation, which was that the sale would be completed by December 1999. 663 Of course, in circumstances where Caterpillar has asked a dealer to sell its interests in a dealership and the sale successfully takes place, then 90 days' notice given at about the time the transfer is to occur may well be adequate. 664 The particular circumstances in this case are that in deciding to end the relationship Caterpillar afforded the applicants the opportunity to sell their interests in the dealership. That sale was unsuccessful and the respondents moved, albeit unfairly, to cancel the dealership agreements on 90 days' notice. The termination notices have not yet taken effect by virtue of these proceedings. 665 I do not consider that I am in a position to make a judgment about whether or not 90 days' notice would be fair in the circumstances referred to in the preceding paragraph. If, however, the Court finds unfairness within the meaning of ss 105 and 106 of the Industrial Relations Act but refuses the primary relief sought by the applicants the question becomes whether the Court should grant the alternative relief claimed, that is compensation, and/or some other form of relief such as a longer period of notice than 90 days.

[196]

124 The sale process was, of course, contaminated by the conduct of both parties. Whilst it was found that the applicants were uncooperative and caused delay in the sale process and that the unfairness of the respondents in issuing the termination notices was to be tempered by the applicants' conduct, it must not be lost sight of that the respondents' conduct was discreditably unfair. At pars [654] to [655] of the primary judgment the Court said: 654 Even if I were to put aside the inference that Caterpillar and the Stokes' organisation had an understanding about the cancellation of the dealership and its consequences, there remains the question of whether the respondents acted unfairly or unconscionably in moving to cancel the dealership. In my opinion they did so act. The applicants [sic - respondents] displayed a distinct partiality towards the Stokes' organisation. There was no genuine attempt by the respondents to ascertain the applicants' side of the story regarding the sale negotiations prior to deciding on 17 September to initiate termination; there was no opportunity given the applicants to comment on the view taken by the respondents that the applicants were delaying the sale process and that the applicants were not negotiating in good faith. The respondents appear to have simply accepted the Stokes' organisation's version of events, namely, that the applicants reneged on a commercial agreement, which was not the case. There was no constructive effort on the part of the respondents to assist to bring about a settlement after 17 September despite the applicants' desire for them to intervene and assist in bringing about such a settlement. There was no effort to meet with the applicants prior to deciding to initiate termination despite the fact that all of the relevant senior executives of Caterpillar were in the right place at the right time to do so. 655 There was no investigation/evaluation as to whether or not the applicants had behaved reasonably or unreasonably in the sale process but rather an acceptance of the Stokes' organisation's view as to the cause of the problem.

[221]

146 The respondents further submitted that: The Applicants have had the luxury of an effective period of notice of several years in which to sell the dealership or pursue the various other business opportunities discussed with the banks. The position is that they received clear notice, in June 1999, that "there was no turning back". They have had, since that time, over three and a half years to order their affairs and for the Crawford Fitting factors to be fulfilled. As the Court has found, the Applicants have known, since 8 June 1999, that "the relationship was over and there was no turning back". That message was reinforced on further occasions in June 1999. Similarly, "as at late 1999/early 2000, the Applicants had been told in no uncertain terms that the relationship was over and that Caterpillar wanted them to sell". Furthermore, "even before the discussion between Mr Gough and Mr Owens on 7 February 2000 the Second and Third Applicants were alert to the prospect of termination even if they did behave reasonably in the sale process but the sale did not eventuate" [par [565] of the primary judgment]. The Court rejected the Applicants' contention that Caterpillar had assured them that they would retain the dealership in the event that no agreement for a sale at fair value could be reached. … It is clear from the Primary Judgment that the Applicants were in no doubt at all about the future of the relationship and that they had been given a " business-like notification " on 8 June 1999 (reinforced several times shortly thereafter). The Applicants then set out to, or at least should have set out to, begin " arranging their affairs " in a manner consistent with the chief purpose of a notice for a reasonable period as set out in Crawford Fitting… … [I]f the Applicants have failed to take the steps, enumerated in Crawford Fitting , during the extended notice period of which they had the luxury, they have nobody to blame but themselves. The Applicants, like all plaintiffs or applicants, took the risk of pursuing litigation and the concomitant risk that they would not succeed. The Applicants, apparently confident that they would obtain orders for the continuation of the dealership agreements in perpetuity, presumably assessed and determined to accept the risk that they would not succeed and that they would be required to relinquish the dealership rights. That they did not commence winding up their affairs, etc as contemplated by Crawford Fitting , having erroneously assessed their prospects of success in this proceeding, is their fault and the blame therefore is not to be laid at the feet of the Respondents. Moreover, they did so with the fallback option of sale to WesTrac or other options in mind, as is evidenced by the documents not disclosed by the Applicants but extracted from the banks.

[225]

149 In relation to the period from October 2000 to December 2002, when the primary judgment was given, the applicants submitted: It is also clear, that but for the commencement of these proceedings which gave rise to an "extension" of the 90 day notice period so that it became a 365 notice period, the Applicants would have been required to exit the business by 25 January 2001. It is to be noted that the Applicants contend that even that 12 months notice of termination period was not a fair and reasonable notice period by reference to any proper application of the Crawford principles to the facts of the Applicants' dealership business and the circumstances prevailing as at October 2000. These proceedings were, of course, not principally directed to the length of the notice period provided by Caterpillar (whether that be 90 days or 12 months) but rather to the more fundamental issue as to whether Caterpillar could in fairness terminate the Applicants' Dealership Agreements at all. This involved the arguments concerning qualified tenure and the conditional nature of the termination right given the mutual security/longevity expectation of the parties and the Respondents' termination as a last resort policy, that reflected that expectation. As the Court has found, given that the Applicants were pursuing claims designed to keep the dealership , namely claims about whether termination notices could or should have been validly or fairly issued in the prevailing circumstances and, if so, claims about the unfairness of the notice provisions in the Agreements (and about the notice actually given), it was reasonable for the Applicants to refuse to recommence negotiations with the Stokes organisation for the sale of their dealership business (see: par [695] of the primary judgment). The Applicants further submit that it was also reasonable for them ( for the same reasons ) not to take active steps to wind down or wind up the business or to take significant steps to secure or set up some suitable alternative business on the basis that the proceedings might fail completely or that, whilst the Applicants might at least win with respect to the conditional nature of the Respondents termination right, the Court would or might nevertheless conclude that Caterpillar should/would not be required to comply with their own last resort policy as a pre-requisite to the actual termination of the Applicants. In other words, the Applicants submit that it was reasonable for them to wait and see the outcome of phase one of these proceedings before making firm decisions and taking active steps as contemplated by the Crawford principles. Hence it is unreasonable for the Respondents to contend that the time that has elapsed since late October 2000, should also be treated as Crawford time.

[230]

155 Secondly, the primary judgment at par [692] referred to discussions that had been held by the applicants with their financiers: 692 The respondents referred to various bank and other documents that they submitted revealed the various undisclosed options considered by the applicants and the fact that they were pursuing a deliberate strategy on the basis of perceived fall back positions. The essence of this strategy, it was submitted, was tying Caterpillar up in the courts for years knowing there was always the option of selling to WesTrac or pursuing some other profitable alternative. The respondents referred to a number of examples of the alternatives, including: (a) Danckert's 14 June 2001 letter to Colin O'Connor of Westpac attached updated financial information in respect of the borrowing facilities in place between Gough & Gilmour and Westpac. The letter stated, in part: "I also confirm my previous advice to you that we do actually have 'on the table' a refreshed offer from Australian Capital Equity indicating their willingness to resume negotiations to purchase the company for an amount equal to net assets, plus goodwill of $50 million. Whilst their proposal is not currently being pursued, it continues to represent a fall-back position for our shareholders". (b) Westpac's "credit approval summary" for Gough & Gilmour dated 25 August 2001 recorded, under the heading "principal credit risks and justification", the following: "The outcome of the litigation against Caterpillar of Australia is expected to take many more months to decide (likely early 2002) Win or lose, Gough & Gilmour have some reasonable commercial alternatives available to it, including the option to sell the business to WesTrac for an amount approaching the current offer of net assets plus $50 million goodwill. WIB's position is adequately documented and secured and in the unlikely event that we would have to exercise our security, our facilities would largely be repaid by the net amount that would be owed by CAT for the return of Caterpillar inventory plus cash on hand." (c) Westpac's August 2001 "Credit Risk Analysis" stated, amongst other things: "There are many possible outcomes for Gough & Gilmour depending on the result of the litigation including: · the business continues 'as is' with a 'fairer' distribution agreement; · the business is sold through a competitive process i.e. involving more potential buyers than just WesTrac; · WesTrac and Gough & Gilmour recommence negotiations for the sale of the business and an agreement is reached. According to Gough & Gilmour the offer from WesTrac of 'net assets plus $50 million in goodwill' is still 'on the table' but is not being actively pursued at present; · Gough & Gilmour continue to trade as dealers in used Caterpillar equipment and provide maintenance services for Caterpillar and other equipment. They may also use their extensive branch network to distribute other related products to the same customer base. In addition they could acquire or merge with other businesses (such as Emeco or Expressway Spares) that currently operate in this market 'space'." 156 In evidence in the proceedings was a credit summary by one of the applicants financiers, ABN Amro, dated 28 November 2001 which stated in part: We have assessed below several scenarios. … Best case scenario is that G&G continue with an ongoing business that is growing and extremely profitable. The next case is that they sell the business for a price approx A$100 min (on a going concern basis). If G&G lose the court case and hence the dealership then there exists several scenarios under which G&G operate a business on a reduced basis. Annexure 3 outlines the debt outstanding after the Cat buyback is A$22.4 min. G&G is currently assessing various scenarios in the event that they lose the Cat distributorship. Initially, G&G will continue with its servicing of equipment business which generates an annualised revenue of A$65.3 min and a gross profit of A$35.9 min and expand its used equipment business (revenue of $24.2 min and gross profit of A$1.4 min). Thereafter G&G will look to expand the used market (management believes there is potential to increase it to approx AUD100 min), reduce its workforce over time (which will essentially see a transfer to the new dealer) and hold onto as much service business as possible. G&G's infrastructure and distribution network make it an ideal dealer for other international equipment makers such as Leibherr who do not have a network. Harcourt Gough has also grown a profitable equipment rental/operating lease company over the last few years. The worst case scenario where G&G lose the Dealership, the company will still be able to trade as a used machinery and service business, albeit on a lower scale. G&G's viability is not dependent on new vehicle/machinery sales. Given the financial profile of the company and the commitment shown by the major shareholder, we believe that refinance risk will be acceptable under either scenario.

[249]

174 In considering what the alternatives might be for the applicants in the event a sale is not successful, the applicants have identified such alternatives as being: an equipment rental/operating lease company; trading as a used machinery and service business; a dealer for other international equipment makers such as Leibherr or, one might expect, any combination of these. I note Mr Gough's evidence that it is not a feasible option for the applicants to become, in the short to medium term, a dealer for any of Caterpillar's competitors within Australia. I assume this does not include companies such as Liebherr. But even if that were not the case, it could not reasonably be expected that any notice period would have to be of such length that it allowed the applicants to wait for a competitor's dealership to become available. 175 It is difficult to know how long it might take for the applicants to enter into one or other of these alternative arrangements. In Crawford Fitting, in arriving at the conclusion that the distributors had not been able to show that six months notice was unreasonable, the Court of Appeal had the benefit of considering the matter retrospectively in that by the time the proceedings came before the Court, the distributors had found new suppliers. That is not the case here. I do observe, however, that in seeking to become Caterpillar dealers in 1988/89, the second and third applicants did so by purchasing the Waugh and Josephson dealership from the Bond Corporation. The applicants were first introduced to the Bond Corporation as potential buyers in September or October 1988 and the dealership agreement was signed with Caterpillar in February 1989. Thus, a period of some five months was involved in the second and third applicants becoming dealers. The relevance of this lies in considering how long might a reasonable period be for the second and third applicants to enter a new dealership (if one were available) in 2003-2004. I note that the sale by Bond may well have been expedited by Bond's apparent need to sell quickly.

[275]

202 The applicants further submitted: The evidence in this case and the findings of the Court support the conclusion that the Fourth Assurance formed part of the Overall Arrangement between the parties for section 106 purposes and that it operated unfairly in the 1999/2000 sale process because: (a) It contemplated Caterpillar intervention/assistance to ensure that the Applicants received a fair market value for the business, yet it did not require the Respondents to take any particular steps or to exercise its obvious power over the Stokes organisation with a view to maximising the prospects of a deal at a fair price. (b) It did not permit the Applicants to have discussions/negotiations with a number of potential dealer candidates so as to enable the Applicants to gain a fair idea as to the true market value of its business (see: paragraphs 552, 556, 557 and 561 of the Judgment), let alone a commitment from Caterpillar to select the preferred dealer candidate from amongst a short list of acceptable dealer candidates, being the one that managed to do a deal with the Applicants. That is, an arrangement the same as the First Respondent offered to the Bond Corporation in 1989 (see: paragraphs 557 and 559 of the Judgment). (c) It did not contain any commitment on the part of Caterpillar to any form of dispute resolution mechanism in the event that there was a disagreement between the Applicants and the Stokes organisation as to a fair market price or about any other essential feature of the deal. (d) It did not impose on the Respondents the essential obligation to insist that the Stokes organisation (or any other potential dealer candidate) agreed to subject itself to a designated dispute resolution process (to resolve significant differences as to price and/or terms), as a pre condition to gaining or retaining its status as the preferred dealer candidate … (e) It permitted (or failed to prevent) the Second Respondent (via Owens) being misled into supporting the recommendation for cancellation by permitting the Stokes organisation to put its biased/self interested and inaccurate account of the facts to Owens in a face to face meeting whilst at the same time deliberately denying the Applicants an opportunity to put their side of the story and to otherwise respond to the accusations made by the Stokes organisation, before any decision to cancel was taken. (f) It permitted (or failed to prevent) the Respondents' representatives, Tong, Curfman and Ramseyer to give the Fourth Assurance commitments to the Applicants so as to induce them to agree to a sale negotiation process and then to simply renege on those commitments without good cause and indeed on the basis of incorrect and biased information supplied by the Stokes organisation itself (see: paragraphs 654, 655, 656 and 657 of the Judgment).

[298]

218 Clause 7(a) is proposed as follows: [For the purposes of the sale process contemplated in clause 6(a) and (b) hereof:] the preferred dealer candidate selected by Caterpillar to negotiate with Gough & Gilmour will, as a condition of such selection, agree to abide by the dispute resolution mechanism set out in clause 9 hereof. 219 The respondents submitted that cl 7(a) purports to impose upon them a contractual obligation to force upon an independent third party (ie the "preferred dealer candidate") a form of "dispute resolution mechanism" that would be acceptable to the applicants. It was submitted that the respondents cannot assume a contractual obligation which they cannot perform. Secondly, if the respondents did force, entice, induce or otherwise influence the "preferred dealer candidate" to accept such a "dispute resolution mechanism", the respondents would assume contractual obligations in relation to the "preferred dealer candidate" and would be open to claims from the "preferred dealer candidate" under contract, statute (such as section 52 of the Trade Practices Act and tort). 220 The applicants submitted there was no reason in principle to the respondents being required (by appropriate variation) to insist that potential dealer candidates seeking to negotiate with the outgoing dealer agree in advance as to the "ground rules" to be applied in any such negotiations. Further, it was submitted such ground rules or conditions are not being "imposed" upon third parties as such parties could simply elect not to participate in any negotiations if they were unhappy with those ground rules. The applicants also contended that the imposition of such ground rules was necessary if the fourth assurance was to be effective at all because, otherwise, it would be "read down" so that it meant that the respondents were only required to provide suitable assistance until the point of impasse/breakdown in the negotiations - circumstances which were clearly not the intention at the time the fourth assurance was given.

[308]

· There are a number of serious difficulties with cl 9 including: the appointment of the proposed umpires; how is it to be determined, and who is to determine, when the situation is such that "the sale process becomes deadlocked and/or breaks down"?; the potential for the applicants to abuse the dispute resolution process; the uncertainty as to the requirement that the umpires (whoever they may be) "conciliate and/or mediate" the dispute in question; the utility of engaging in mediation or conciliation with the applicants, and particularly Gough, is open to real question; there is no good reason why Caterpillar should be subjected to a buyer of last resort obligation in circumstances where, through no fault of Caterpillar, the umpires determine that it is not possible or appropriate to exercise their powers to make a final and binding decision; the provisions of cl 9 are ambiguous, uncertain, unenforceable, and would lead to absurd, unjust and commercially unrealistic results. 227 The applicants sought to address a number of the criticisms levelled by the respondents at the original Schedule B by providing a revised version, which is the one referred to in these proceedings. The respondents have, however, dismissed the revisions for a number of reasons including that the changes: · do not address the array of difficulties with the Schedule B regime itself; · raise further areas of potential dispute between the parties; · reveal a blatant attempt to enshrine in the contract a compensation right in circumstances where such a course is not contemplated or permitted by the terms of the legislation. 228 I do not propose to vary the overall arrangement to include a provision in the nature of cl 9 of Schedule B for the following reasons: 1. Coonan and Owens are not appropriate persons to be appointed as "umpires" generally for the reasons expressed by the respondents. Given the personalities involved, the need to agree on other persons to act as umpires is likely to cause unnecessary controversy and delay. 2. In the particular circumstances to which the dispute resolution procedure is directed, it is not appropriate that an umpire/conciliator or mediator assumes the role of arbitrator. 3. In the event that the umpires agree that it is either not possible or not appropriate to exercise their powers to make final and binding decision(s) to resolve the outstanding issues between the parties, then they are at liberty to decline to make any such final and binding decision(s) provided they give reasons for their decision to do so. In the event that the reason for declining to make a decision is not based on belief that the approach adopted by Gough & Gilmour in the sale process revealed a lack of good faith and/or reasonableness, then Caterpillar will immediately offer to purchase Gough & Gilmour's dealership business. The effect of this could be that for reasons beyond the control of Caterpillar the sale does not go through and Caterpillar is then required to purchase the shares. It may be that Caterpillar would wish to nominate another dealer candidate but would be precluded from doing so. In such circumstances a requirement that Caterpillar buy the shares would be unfair. In any event, for the reasons expressed later in this judgment I do not consider that it is appropriate to provide for a buyer of last resort provision.

[321]

· varying the contract or arrangement to include a relationship management provision would involve the Court revisiting its judgment and altering it by including a new finding of unfairness; · the decision in the primary judgment to decline to grant the primary relief sought, and the reasons for doing so, preclude the variation of the contract to include a relationship management provision; · the Court's questioning in the primary judgment of the "utility of introducing the concept of procedural fairness in this case" has some negative implications for a variation to incorporate a relationship management provision; · the Court's view expressed in the primary judgment view that the absence of a dispute resolution provision had not caused unfairness, has negative implications for the appropriateness of a relationship management provision; · the applicants' role, attitude and approach in the context of the relationship should preclude the Court from varying the contract to include a relationship management provision; · the absence of a level of trust, respect, communication and cooperation between the parties should preclude the Court from varying the contract to include a relationship management provision; · because the parties would not have contemplated a relationship management provision at the time the contracts were signed, that it is inappropriate to insert one now; · a variation to include a relationship management provision cannot be made, given the Court's determination that the relationship is to come to an end; · that the clause suggested is too vague to be commercially workable or enforceable; · a relationship management provision would interfere to an unjustifiable extent with the respondents' commercial operation, and would lead to further disputes and litigation; · that the clause is commercially unrealistic 238 As I have already explained, cl 10 would not operate in the same way as, for example, the buyer of last resort provision. That provision, had it been granted, would have actually required Caterpillar to buy back the dealership business. Clause 10 would have the effect of varying the overall arrangement to address the failures of the respondents to manage the relationship with the applicants but it would not require the parties to actually implement the variation because the dealership would either have been sold or would have been in the process of being sold, or notices of termination would have issued by virtue of the other provisions of Schedule B. The real value of cl 10 to the applicants would be to provide the basis for a claim for money orders under s 106(5) of the Act.

[329]

· I adhere to my view that the respondents took the easy way out. If the respondents had put together a dossier of the relationship and other problems they had encountered over the history of their relationship with the applicants and which was capable of withstanding independent scrutiny, together with a realistic plan as to how the relationships might be improved, the respondents would have established a proper foundation for moving against the applicants, if the need arose. (see: par [457] of the primary judgment). · The dossier and plan could have been provided to the applicants with an ultimatum that unless the relationship improved in line with the plan, a recommendation would be made to Peoria to terminate the relationship. Having heard all the evidence I can imagine that the second applicant, in particular, would have challenged to the point of exasperation both the dossier and the improvement plan. Nevertheless, with sufficient resolve and in the context of a real threat to end the relationship, the relevant issues causing concern for the first respondent could have been addressed and the applicants left in no doubt as to their tenuous position (see: par [458] of the primary judgment). · Given the respondents' evidence that cancellation is a measure of last resort … it seems to me to have been incumbent on the respondents to satisfy themselves that, indeed, there were no options open other than cancellation and that proper grounds existed to support cancellation. This they failed to do (see: par [657] of the primary judgment). · Before putting in train the machinery to end the relationship it was incumbent on the first respondent to at least give notice of its intention to do so. In failing to advise the applicants of its intention to recommend that the relationship be brought to an end and in failing to properly consider an improvement plan to allow the applicants the opportunity to rehabilitate themselves, the first respondent acted unfairly and inconsistently with its "last resort" policy, which involves dealers being given every reasonable opportunity of remaining as a Caterpillar dealer (see: par [780(14)] of the primary judgment). · Mr Nitto's recommendation to end the relationship was made without proper notice being given to the applicants and without the Applicants being given any opportunity to salvage the relationship with the first respondent … (see: par [791] of the primary judgment). 246 The applicants submitted: [I]f [the improvement plan had been] adhered to [it] obviously would have minimised the prospect of the Respondents' engaging in the unfair conduct found by the Court at that point in time when a recommendation to terminate the relationship was made to Peoria. Accordingly, the Applicants contend that the Overall Arrangement (and/or the Agreements) was unfair in that it failed to contain such a provision and the Court should correct for that unfairness by varying the Overall Arrangement (and/or the Agreements) to insert such a provision. As is apparent from the regime set out in Schedule B, and as has been earlier indicated to the Court, in light of its findings that the relationship has to end soon, the Applicants do not contend (because they cannot do so, given the requirement of "consistency") that this clause, if introduced, would impose an obligation on the Respondents to now comply with the Improvement Plan provisions before proceeding to issue any further notice of termination.

[342]

258 The respondents submitted that the Court has expressly rejected the insertion of a dispute resolution mechanism into the agreements and held that the absence thereof did not give rise to unfairness. It was submitted that the Court's reasons are equally applicable to the provision now proposed by the applicants in clause 11. In its primary judgment the Court said in relation to a disputes procedure clause at par [672] that it "would not be a solution for the fundamental relationship difficulties between the parties" and that such a provision: might well create its own unfairness. This is especially so when the relationship is in the nature of a relational contract and is meant to operate on the basis of mutual trust and confidence and where the parties are required to work out, in good faith, their own solutions in circumstances where the issue is not dealt with expressly in the contract (par [675]). 259 The context in which the Court decided against inserting a disputes procedure in the dealership agreements is quite different to that applicable to the question of an improvement plan. If it had been granted, the disputes procedure would have governed how the parties were to resolve any disputes that might have arisen between them. The Court found, however, that such was the poor state of the relationship a disputes procedure would not have been effective. The improvement plan, on the other hand, is a manifestation of the respondents' cancellation-as-a-last-resort policy. That is, the plan would have been implemented in a last ditch effort to avoid cancellation and if it did not prove successful it would have been open to the respondents to terminate the dealership agreement. Thus, the applicants would have understood that if they cooperated in the improvement plan they could conceivably save their dealership but if they did not, they would lose it. This is a completely different set of circumstances to that pertaining to a procedure to resolve ad hoc disputes.

[356]

272 The applicants submitted that a variation of the overall arrangement (and/or the dealership agreements) to introduce cll 1 and 2 of Schedule B would be an appropriate way for the Court to remedy the unfairness that the Court has found with respect to this matter. Further, that: [T]he last resort provisions proposed by the Applicants in clauses 1 and 2 … will not impose any further obligation on the Respondents to comply with their last resort policy prior to issuing any further notice of termination on the Applicants. That is, the Applicants contend that, in light of and because of the Court's finding that the relationship must end soon, the most appropriate remedy for the various breaches referred to above is to vary (or set aside from a prospective date) the Overall Arrangement (and/or the Agreements) and then award the Applicants a sum regarded by the Court as "just" compensation as victims of that unfairness. 273 The respondents submitted that: [T]he proposed variations embodied by clauses 1 and 2 are both inappropriate and untenable. In addition to the matters raised generally above (see submissions regarding the improvement plan), this is because: (1) the variations are directly inconsistent with the findings in the Primary Judgment, the Court's observations in Interlocutory Judgment No 13, and its refusal to grant the Primary Relief; (2) the variations are unsupported by the Primary Judgment, that is, the relief sought lacks the necessary nexus with the Court's findings adverse to the Respondents; (3) even if it was assumed for the purpose of argument that the relevant nexus did exist, the variations are excessive and disproportionate to any unfairness found by the Court; (4) the variations would not have been countenanced by the parties had they been proposed at the time that the contract was entered into; (5) the variations are inappropriate, given the Applicants' own highly culpable conduct (as found by the Court) in respect of the sale process and the relationship with Caterpillar; (6) the variations, even if made, would make no difference to the final outcome and would, in that sense, be pointless and futile; (7) the variations are inconsistent with the terms of the agreement and, in any event, are ambiguous, commercially unrealistic, uncertain and will inevitably give rise to further disputes between the parties.

[370]

287 The Court proposes to make orders to the following effect: (1) Leave is granted to amend the third further amended summons to reflect the joinder of the third and fourth respondents to the proceedings pursuant to interlocutory judgment (No 12) [2002] NSWIRComm 379. (2) Subject to Orders 3, 4 and 5 hereof, leave is granted to amend the third further amended summons to incorporate a new Schedule B to the summons in the terms sought by the applicants in their proposed fourth further amended summons. (3) The proposed amendments to the third further amended summons concerning compensation will be considered in the compensation phase of the hearing. (4) Leave to amend the third further amended summons by seeking an order under s 107 of the Industrial Relations Act 1996 is refused. (5) Leave to amend the third further amended summons to reserve the rights of the applicants to amend the summons to reflect any further findings of the Court is refused. (6) The Court will consider the issue of accumulated goodwill in the compensation phase of the hearing. (7) The overall arrangement as determined by the Court in Gough & Gilmour Holdings Pty Limited v Caterpillar of Australia Limited (No 11) [2002] NSWIRComm 354 to have existed between the applicants and the respondents is varied as follows: (i) Harcourt David Gough and Anthony Lansley Gilmour will have a period of 90 days ("the additional sale period") commencing on the day following the date of this judgment to sell their shares in the dealership business to that person nominated by Caterpillar of Australia Limited as the "preferred dealer candidate". Subject to Orders 7(ii), 7(iii) and 7(iv) hereof, after the expiry of the additional sale period Caterpillar of Australia Limited may give 26 weeks' notice of termination of the dealership agreements and the notice of termination period will commence to run from a date seven days after the expiry of the additional sale period. (ii) In the event that Messrs Gough and Gilmour decide that they do not wish to sell their shares, that decision will be conveyed to Caterpillar of Australia Limited within 30 days of the date of this judgment and the additional sale period will terminate on the day after the date that Messrs Gough and Gilmour advise Caterpillar of Australia Limited they do not wish to sell ("termination date of the additional sale period"). Upon being so advised Caterpillar of Australia Limited may give 26 weeks' notice of termination of the dealership agreements and the notice of termination period will commence to run from a date seven days after the termination date of the additional sale period. (iii) In the event that a sale occurs or a binding agreement to sell is made prior to the expiration of the additional sale period, Messrs Gough and Gilmour will advise Caterpillar of Australia Limited to this effect. Upon being so advised Caterpillar of Australia Limited may give 90 days' notice of termination of the dealership agreements and the notice of termination period will commence to run from a date seven days after the date of sale or the date of a binding agreement to sell, whichever is the earlier. (iv) The date upon which the 26 weeks' period expires shall be known as the "final termination date". In the event a sale or a binding agreement to sell (whichever is first) occurs during the 26 weeks' notice period on a date that is more than 97 days prior to the final termination date the respondents shall be entitled to issue new termination notices giving the applicants 90 days' notice which will commence to run from a date seven days after the date of sale or date of the binding agreement to sell whichever first occurs. (8) The overall arrangement as determined by the Court in Gough & Gilmour Holdings Pty Limited v Caterpillar of Australia Limited (No 11) [2002] NSWIRComm 354 to have existed between the applicants and the respondents is further varied as follows: During the additional sale period Caterpillar of Australia Limited, Caterpillar Inc, Caterpillar SARL and Caterpillar Overseas Credit Corporation SA ("Caterpillar") will not at any time: (i) approach, solicit or entice employees or contractors of Gough & Gilmour Holdings Pty Limited, Harcourt David Gough and Anthony Lansley Gilmour ("Gough & Gilmour") to terminate any contract or arrangement between such employees or contractors and Gough & Gilmour; (ii) approach, solicit or entice any person to terminate, withdraw from or substitute any contract with Gough & Gilmour for the supply of any machine, part, product or other equipment referred to in the Agreements; (iii) approach, solicit or entice, for the purpose of having the effect of causing loss or damage to Gough & Gilmour, any person to refrain from entering into any contract with Gough & Gilmour for the supply of any machine, part, product or other equipment referred to in the Agreements; (iv) enter into any Sales and Service Agreement; Distribution Agreement; or Product Support Agreement for the supply of any machine, part, product or other equipment referred to in the said Agreements relating to New South Wales and/or the Australian Capital Territory, with any other person or entity; and (v) procure or encourage any person to establish any infrastructure or operations in New South Wales and/or the Australian Capital Territory in preparation for, or for the purpose of, exercising contractual rights of the kind referred to in the Agreements, on any basis other than by acquisition of the business of Gough & Gilmour. (9) The overall arrangement as determined by the Court in Gough & Gilmour Holdings Pty Limited v Caterpillar of Australia Limited (No 11) [2002] NSWIRComm 354 to have existed between the applicants and the respondents is further varied ab initio as follows: 1. For the purposes of this variation the parties are referred to both individually and jointly as follows: (a) Gough & Gilmour Holdings Pty Limited, Harcourt David Gough and Anthony Lansley Gilmour - "Gough & Gilmour"; and (b) Caterpillar of Australia Limited, Caterpillar Inc, Caterpillar SARL and Caterpillar Overseas Credit Corporation SA - "Caterpillar". 2. If Caterpillar holds a serious concern that relationship difficulties it has with Gough & Gilmour may require consideration be given to terminating the dealership, then: (a) Caterpillar will implement an improvement plan as set out in (b) below; (b) the improvement plan is to include the following components: (i) the relationship problems in which improvement is sought are to be clearly identified and described; (ii) methods of bringing about improvement and evaluation of improvement are to be agreed between the parties; (c) the improvement plan is to be pursued over a period of six months, or for such other period as may be agreed between the parties; and (d) Gough & Gilmour will be given the opportunity to complete the plan before a recommendation is made within Caterpillar for the termination of the dealership or any exercise of its right to terminate the dealership agreements. 3. In the event that Caterpillar has complied with clause 2 hereof but this has proved to be unsuccessful, Caterpillar will take steps to provide Messrs Gough and Gilmour with a proper opportunity to sell their shares in the dealership business and will assist Messrs Gough and Gilmour receive fair value for those shares in that business by ensuring that the sale process is conducted on a reasonable basis without duress. Such steps are to be taken prior to the issue of any notice of termination. Furthermore, Caterpillar shall not use the act or timing of the issue of a termination notice for the purpose of weakening Gough & Gilmour's bargaining position in any sale process. 4. To avoid doubt, Caterpillar will comply with its obligations under clauses 2 and 3 hereof by 25 October 2000. (10) The terms of Orders 7 to 9 inclusive are to operate notwithstanding any provision to the contrary in the dealership agreements or any notices of termination already issued. (12) The injunction granted by orders made on 24 October 2001 and continued by orders made on 13 February 2003 is dissolved. (13) Proceedings are stood over to a date to be fixed. (14) Costs are reserved.

Parties

Applicant/Plaintiff:

Gough & Gilmour Holdings Pty Ltd and ors

Respondent/Defendant:

Caterpillar of Australia Ltd and anor

Cases Cited (58)

FOURTH RESPONDENT Caterpillar Overseas Credit Corporation SA FILE NUMBER: IRC 5227 of 2000 CORAM: Boland J Unfair Contract - Primary relief under s 106 of the Industrial Relations Act 1996 refused - Whether leave should be granted to applicants to amend submissions for relief - Leave granted in-part - Whether alternative relief should be granted - Reasonable notice to terminate dealership agreements - Sale process - Orders made CATCHWORDS : Practice and Procedure - Unfair Contract - Primary relief under s 106 of the Industrial Relations Act 1996 refused - Whether leave should be granted to applicants to amend submissions for relief - Leave granted in-part - Whether alternative relief should be granted - Reasonable notice to terminate dealership agreements - Sale process - Orders made LEGISLATION CITED : Industrial Relations Act 1996 Industrial Relations Commission Rules 1996 Alghussein Establishment v Eton College [1988] 1 WLR 587 Anchor Butter Company Ltd v Tui Food Ltd & Ors [1997] 3 NZLR, 107 38 IPR 250 Attard v Bridges Financial Services [2000] NSWIRComm 242 Australian Blue Metal v Hughes [1963] AC 74 Avis v Australian Mutual Provident (1997) 111 IR 1 Avis v Australian Mutual Provident Society (Unreported, Schmidt J, CT 1310 of 1995, 21 December 1995) Balmain New Ferry Co Limited v Robertson (1906) 4 CLR 379 Beahan v Bush Boake Allen Australia Ltd (1999) 47 NSWLR 648, 93 IR 1 Boschetti v Carr [2000] WASC 228 Brooks v Wyatt (1994) 99 NTR 12 Bruce v AWB Ltd (2000) 100 IR 129 Campbell v Metway Leasing Limited (1998) ATPR 41-630 Canberra Star Motors Pty Limited v Chrysler Jeep Automotive Australia Pty Limited [1999] NSWIRComm 310 Carr v J A Berriman Pty Ltd (1953) 89 CLR 327 Central Exchange Ltd v Anaconda Nickel Ltd [2002] WASCA 94 Commonwealth Bank of Australia v Mehta (1991) 23 NSWLR 84 Crawford Fitting Co v Sydney Valve and Fitting Pty Ltd (1988) 14 NSWLR 438 Drinkwater v Caddyrack Pty Ltd (unreported, Young J SCNSW, 3970 of 1996, 25 September 1997) F F Seeley Nominees Pty Ltd v El Ar Initiations (UK) Ltd (No 2) (1990) 55 SASR 314 Futuris Industrial Products Pty Limited v Arrow Industries Pty Limited (unreported, Federal Court of Australia, Beaumont, Foster and Beazley JJ, No G611 of 1993, 18 April 1994) Futuris Industrial Products Pty Ltd v Arrow Industries Pty Ltd (unreported, Federal Court of Australia, Wilcox J, 22 July 1993) Gough and Gilmour Holdings Pty Ltd and Ors v Caterpillar of Australia Ltd (No 12) [2002] NSWIRComm 379 Gough and Gilmour Holdings Pty Ltd and Ors v Caterpillar of Australia Ltd (No 13) [2003] NSWIRComm 26 Gough and Gilmour Holdings Pty Ltd and Ors v Caterpillar of Australia Ltd and Ors (No 14) [2003] NSWIRComm 44 Gough and Gilmour Holdings Pty Ltd v Caterpillar of Australia Limited (No 11) [2002] NSWIRComm 354 Gough and Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd and Anor (No 9) [2001] NSWIRComm 260 Graham v Macquarie Bank Limited [2000] NSWIRComm 253 Heyman v Darwins Ltd [1942] AC 356 Hospital Products Limited v United States Surgical Corporation (1984) 156 CLR 41 Jager v Australian National Hotels Pty Limited (1998) 7 Tas R 437 CASES CITED : Kwong v Stone Microsystems (Aust) Pty Limited (1996) 82 IR 255 Laurinda Pty Ltd v Capalaba Shopping Centre Pty Ltd (1989) 166 CLR 623 Leotta v Public Transport Commission (NSW) (1976) 9 ALR 437 Macquarie Bank Limited v National Mutual Life Association of Australia Limited (1996) 40 NSWLR 543 Mercantile Mutual Insurance (Australia) Ltd v Farrington (1996) 44 NSWLR 634 Mersey Steel & Iron Co v Naylor, Benzon & Co (1884) 9 App Cas 434 Munro v Chubb Security Holdings Australia Limited [2000] NSWIRC 215 National Australia Bank Limited v Nobile (1991) 100 ALR 227 Nordby v Barclays Investment Service (1993) 53 IR 319 North v Television Corporation Ltd (1976) 11 ALR 599 O'Brien v Australian Native Landscapes Pty Limited (2001) 105 IR 409 Ogilvy & Mather (NZ) Ltd v Turner [1996] 1 NZLR 641 Paviour-Smith v National Mutual Life Association of Australasia Pty Limited (1999) 91 IR 8 Port Macquarie Golf Club Ltd v Stead (1996) 64 IR 53 Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146 Quinn v Jack Chia (Australia) Limited [1992] 1 VR 567 Rankin v Marine Power International Pty Limited (2001) 107 IR 117 Ross T Smyth & Co Limited v TD Bailey Son & Co [1940] 3 All ER 60 Sawyer v Cutler Hammer Pty Limited [2001] NSWIRComm 144 Sheffield v Brambles Australia Limited [2002] NSWIRComm 3 Sheppard v Felt Textiles of Australia Limited (1931) 45 CLR 359 Shevill v The Builders' Licensing Board (1981-82) 149 CLR 620 Singh v Atombrook Ltd [1989] 1 All ER 385 Stenhouse Australia Ltd v Phillips [1974] AC 391 Sunbird Plaza Pty Ltd v Maloney (1989) 166 CLR 245 TCN Channel 9 Pty Limited v Antoniadis (1998) 44 NSWLR 682 The Commonwealth v Verwayen (1990) 170 CLR 394 Thiess Contractors Pty Limited v Placer (Granny Smith) Pty Limited [2000] WASCA 102 Virtue v NSW Department of Education & Training (1999) 91 IR 428 Westfield Holdings Limited v Adams (2001) 114 IR 241 Westfield v Helprin (1998) 82 IR 411 HEARING DATES: 03/25/2003; 03/27/2003; 03/28/2003 DATE OF JUDGMENT: 06/04/2003

[2000] WASC 228

[1999] NSWIRComm 310

[2002] WASCA 94

[2000] WASCA 102

[1997] NSWIRComm 182

[2001] VSC 150

[2000] TASSC 43

(1997) 111 IR 1

(1906) 4 CLR 379

(1999) 47 NSWLR 648

(2000) 100 IR 129

(1953) 89 CLR 327