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

Application under s 106 of the Industrial Relations Act 1996 Judgment No. 15 [2003] NSWIRComm 173

INTRODUCTION 1 These proceedings have a lengthy and factually complex history. This is reflected to a large degree in the fact that the proceedings commenced in October 2000 and that this judgment is the fifteenth to be given in the course of the proceedings. Whilst the background of this matter may be gleaned from the various judgments, it is both convenient and necessary to restate the relevant foundational aspects of, and developments in, the case so far in order to put this latest judgment into context. Much of the background is set out in Gough and Gilmour Holdings Pty Ltd v Caterpillar of Australia Limited (No 11) [2002] NSWIRComm 354, a judgment given on 19 December 2002 ("the primary judgment").

2 The applicants operate a large dealership selling and servicing Caterpillar equipment and parts in a territory encompassing New South Wales and the Australian Capital Territory. On 26 October 2000, Caterpillar of Australia Limited ("the first respondent") served notices upon the first applicant giving 90 days' notice of the termination of the dealership agreements in accordance with the terms of those agreements. The dealership agreements are: a) Sales and Service Agreement entered into between the applicants and the first respondent on 1 July 1991. b) Distribution Agreement for Engines, Parts and Service made between the applicants and the first respondent dated 1 July 1991. c) Product Support Agreement for Engines, Parts and Service made between the applicants and the first respondent dated 12 November 1997. 3 On 27 October 2000 the applicants filed a summons for relief under ss 106 and 107 of the Industrial Relations Act 1996. On the same day, the applicants moved by way of notice of motion for urgent interlocutory relief on an ex parte basis. Orders were made providing limited interlocutory relief to the applicants to the effect that the first respondent was to refrain from informing, advising or otherwise communicating to any person that the respondent had given, or intended to give, notice to terminate the dealership agreements.

4 The notice of motion seeking interlocutory relief came back before the Court on 10 November 2000 for hearing on an inter partes basis when the Court was informed that the parties had reached an agreed position in relation to the issues raised in the notice of motion. The agreed position included an undertaking by the first respondent that the effective termination date to terminate the dealership agreements would be extended to 25 October 2001. Subsequently, directions were issued in relation to the preparation and conduct of the case and dates were set for hearing.

5 In accordance with a further interlocutory judgment issued on 23 November 2000 it was determined that the applicants' summons for relief would be heard in two parts. The first part would address the alleged unfairness of the contracts or arrangements between the applicants and the respondents and whether they should be varied in the terms sought. The second part would deal with issues of compensation but only in the event that unfairness had been found and the primary relief sought was refused. The primary relief claimed by the applicants was continuation of the dealership agreements, albeit with substantial variations that the applicants contended were necessary to reflect what they considered was the intention of the parties at the time they entered into the dealership agreements.

6 It became apparent that the agreement to extend the termination date of the dealership agreements by 12 months would not provide sufficient time in which to complete the hearing and give judgment. On 27 September 2001, the applicants filed a notice of motion in Court seeking to further postpone the termination date of the dealership agreements until the applicants' application under ss 106 and 107 had been heard and determined and, in that period, to prevent the respondents taking any steps inconsistent with or prejudicial to the ongoing operation of the dealership. The respondents strongly opposed the orders sought in the notice of motion.

7 In Gough and Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd and Anor (No 9) [2001] NSWIRComm 260 the Court made orders the effect of which was to keep the dealership agreements on foot until further order and in the intervening period to prevent the respondents taking any steps inconsistent with or prejudicial to the ongoing operation of the dealership. The applicants gave the usual undertakings as to damages.

8 In the event, the hearing continued for the purpose of determining firstly, the question of whether the contracts or arrangements between the applicants and the respondents were unfair or became unfair because of any conduct of the respondents. The second question was whether the primary relief sought by the applicants should be granted pursuant to s 106 of the Act. If the Court found there was unfairness but decided it did not have the power to grant the primary relief sought by the applicants or, as a matter of discretion, decided not to grant the primary relief, the parties reserved their right to make further submissions on the question of alternative relief.

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.

14. The applicants obstructed and delayed the sale process. 15. The respondents acted unfairly in acting to cancel the applicants' dealership by failing to adhere to their policy that dealerships would only be cancelled as a last resort. 16. There is no basis for concluding that the treatment of Mr Gilmour by the respondents constituted a separate and additional incident of unfairness. 17. On balance, the absence of a formal dispute resolution provision in the dealership agreements has not caused unfairness.

787 It may be seen from the foregoing matters that the first respondent did have grounds to recommend to the second respondent that the relationship with the applicants should be brought to an end. Given the nature of the relationship the respondents were entitled to expect that the applicants would work cooperatively with the respondents in an environment of mutual trust and confidence. The applicants resisted the notions of cooperation, trust and confidence in the name of independence. There was some evidence that the first applicant should be regarded as an independent business. But the true nature of the relationship was one based on interdependence and it was not an arm's length commercial arrangement. 788 There was no basis for the applicants believing that they were secure in the dealership in perpetuity in the face of the sustained disregard for a cooperative working relationship with the first respondent. In my opinion, if the respondents had adhered to their stated policy of taking all reasonable steps to avoid cancellation of the dealership, there would have been no issue of unfairness and no question of relief being available to the applicants upon termination of the dealership.

789 Notwithstanding the first respondent's right, however, to terminate the dealership agreements without cause on 90 days' notice, supplementing this express contractual right was an understanding or arrangement that the respondents would take all reasonable steps to avoid the cancellation of a dealership. This was admitted to be the case and was seen to be important by Caterpillar for the reasons expressed by Fites in his 1996 Harvard Business Review article in relation to the generational tenure of dealerships.

790 In my opinion, it was not open to the respondents to ignore or put to one side their obligations to do what was reasonably necessary to maintain the dealership before arriving at any decision to cancel. I note the respondents' contention that parties to a contract are free to define termination rights by express provision and that such terms, understood and accepted by the other party who could be affected by its exercise, override competing obligations that might otherwise arise: Hospital Products Limited v United States Surgical Corporation (1984) 156 CLR 41, Thiess Contractors Pty Limited v Placer (Granny Smith) Pty Limited. Central Exchange Ltd v Anaconda Nickel Ltd. But to accept this contention would render s 106 nugatory, especially s 106(2). 791 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. Moreover, this failure to treat the applicants fairly was compounded by the first respondent's use of the 1997 Report and its misrepresentation of the first applicant as a poor performing dealer.

792 The respondents' conduct in the sale process was also inconsistent with their assurances to the applicants that they would help them in the process of achieving a fair price for the dealership. Whilst some assistance was provided, at crucial stages in the negotiations that assistance was not forthcoming and the respondents' decision to cancel was made without reasonable consultation with the applicants. In my opinion, the respondents conduct in the sale process and in taking the decision to cancel, was biased in favour of the Stokes' organisation and to a significant degree the applicants were left out in the cold.

793 The finding as to the respondents' culpability in the sale process and in relation to the decision to cancel must, however, be tempered by the fact that the applicants' conduct in the sale process on any reasonable analysis of the evidence was uncooperative and caused delay and frustration.

794 In the result, and having regard to the terms and operation of the overall arrangement and the conduct of all of the parties, I find that the overall arrangement referred to in par [780(1)] of this judgment between the applicants and the respondents was unfair within the meaning of ss 105 and 106 of the Industrial Relations Act .

10 As to the primary relief sought by the applicants, this was refused. In this respect, the Court found as follows: 796 I am not prepared to grant the primary relief sought by the applicants in any of the alternatives that have been proposed. My reasons for refusing the primary relief are as follows:

The applicants failed to make out the first and second assurances.

The decision by the first respondent to recommend an end to the relationship with the applicants was brought about by the conduct of the applicants. Such conduct constituted a reasonable and proper basis for the respondents to believe that essential elements of the relationship, namely, cooperation, respect, trust and confidence were no longer present.

To maintain the dealership would involve keeping the parties together in a relationship that requires respect, cooperation, trust and confidence. Those elements did not exist at the time of the respondents' decision to cancel the dealership. These proceedings have involved strong attacks on the credit and character of senior executives of both the applicants and the respondents. It is unrealistic to the extent of being fanciful to expect that a proper working relationship based on cooperation, trust, confidence and respect for one another could be established and maintained between the applicants and the respondents.

Hallmarks of the relationship between the applicants and the respondents were the requirements of respect, cooperation, trust and confidence. These hallmarks strongly suggest a relationship closer to a personal or relational contract as opposed to an arm's length commercial contract. The applicants cannot submit, on the one hand, the contract is akin to a franchise agreement with the characteristics of a relational contract in order to attract jurisdiction and, on the other hand, contend that trust and confidence do not assume particular significance in the relationship because the relationship is commercial in nature.

To grant the primary relief sought would be unfair against the respondents and would put the applicants in an advantaged position in the relationship. By acquiring a tenure that they never bargained for the applicants' would secure an unfair advantage as the dealership would, for all practical purposes, be terminable only in strictly limited circumstances.

It could not be said that in 1989 either the applicants or the respondents would have contemplated the contractual arrangements of the nature now proposed by the applicants; it is neither just nor appropriate to now impose such arrangements on the respondents.

The primary relief sought is grossly disproportionate to the unfairness found to exist and is not in any sense remedial: see Beahan v Bush Boake Allen Australia Ltd (1999) 93 IR 1 at 13. The orders sought in these proceedings travel beyond the purpose of the legislation.

The orders sought amount to orders for specific performance. Such orders, in the circumstances of this case, are not justifiable. I agree with Macken J's observations in Bennett v B.P. Australia Limited where his Honour stated: ...were I to rewrite the contract I would face all the difficulties which in the past have prompted Courts to refuse orders for specific performance of contracts of personal service. The future conduct of BP would be governed by the terms of a lease rewritten by the Industrial Commission, but the conduct of the applicants in carrying out their obligation under that lease (the area in which personal endeavour and initiative resides) would be altogether outside the control of the Court ...(my emphasis).

Except for the failures by the respondents giving rise to findings of unfairness in these proceedings, the contracts and arrangements between the applicants and the respondents have operated fairly for over a decade, with the applicants achieving extraordinarily high returns on their original investments.

797 The applicants' primary relief claim is refused.

11 The Court made the following orders: 1. The Court declares that the overall arrangement as determined by the Court to have existed between the applicants and the respondents is an unfair contract within the meaning of ss 105 and 106 of the Industrial Relations Act 1996.

2. The relief sought by the applicants in accordance with orders 2, 2A and 4 of the applicants' Further Third Amended Summons For Relief and Schedule A to that Summons is refused.

3. Liberty is granted to the parties to have these proceedings relisted for directions in relation to the scheduling of further hearings on the question of whether the applicants are entitled to any alternative relief and, if so, the form of such relief. 4. Costs are reserved.

12 It may be seen that in its primary judgment the Court found two significant episodes of unfairness against the applicants but the Court considered these did not support a finding that the dealership agreements should continue to operate. This left the question of what alternative relief was available to the applicants. Before dealing directly with that issue it is necessary to trace how it developed.

13 In Gough and Gilmour Holdings Pty Ltd and Ors v Caterpillar of Australia Ltd (No 12) [2002] NSWIRComm 379, the Court dealt with an application by the applicants to join two additional respondents, namely, Caterpillar SARL and Caterpillar Overseas Credit Corporation SA. The application was granted. The Court also considered whether the injunctive orders made on 24 October 2001 should continue to apply in their current form or whether they should be amended and, if they were to continue, whether they should extend to the third and fourth respondents.

14 The Court decided to extend the injunctions to the third and fourth respondents. However, the Court said: 25 As to the terms of the injunctive orders, circumstances have changed considerably since those orders were made. In particular, the primary relief sought by the applicants has been refused. In light of the changed circumstances the parties are directed to hold discussions with a view to reaching agreement on revising the terms of the orders made on 24 October 2001 so that the respondents are not unreasonably restrained. The Court will hear the parties on this issue at 2.00 pm on 21 January 2003 as well as on the program of further hearing dates in respect of the alternative relief.

15 In proceedings on Tuesday 21 January 2003 the Court indicated that it was not prepared to dissolve the injunctive orders but would give further consideration as to how they should be revised. The question of the relationship between the alternative relief available to the applicants and the injunctions then became an issue in the proceedings. The applicants were requested to indicate the form of the alternative relief they sought and this was provided on Friday 24 January 2003.

16 In directions to the parties on 28 January 2003 the Court said: The form of any alternative relief that might be available to the applicants obviously bears on the injunctive orders that are currently in place. If compensation is the only available alternative remedy there could be no objection to dissolving the injunctions immediately. On the other hand, if relief is available in the form of an extended period of notice or variations that put in place a sale negotiation process as sought by the applicants then, prima facie, the injunction should stay in place albeit, perhaps, in a revised form.

In order to determine the fate of the injunctive orders it becomes necessary for the Court to consider, firstly, whether there is any relief available to the applicants other than compensation for unfairness. To that end the Court makes the following directions:

(1) The applicants shall review and revise the document entitled "Alternative Relief To Be Sought By The Applicants" and tendered in proceedings on 24 January 2003 so that it represents the applicants' final position.

(2) Together with the revised document referred to in (1) above, the applicants shall file and serve a written outline of submissions as to the basis upon which they claim to be able to pursue the alternative relief they seek and the basis on which they contend the Court may hear and determine such claims by 10.00 am Thursday 30 January 2003.

(3) The respondents shall file and serve a written outline of submissions as to the basis they claim the applicants are precluded from pursuing any alternative relief, other than compensation, and the basis upon which they contend the Court does not have the power to hear and determine the claims for alternative relief by close of business on Friday 31 January 2003.

(4) The Court shall hear the parties as to the availability of alternative relief at 10.30 am on Monday 3 February 2003.

17 In Gough and Gilmour Holdings Pty Ltd and ors v Caterpillar of Australia Ltd (No 13) [2003] NSWIRComm 26, a judgment given on 13 February 2003, the Court stated: 10 The need for this judgment was brought about by the respondents' contention that, with the primary relief sought by the applicants having been refused by the Court, the injunctive orders made on 24 October 2001 preventing the first respondent from terminating the applicants' dealership should be dissolved. The applicants opposed this course on the grounds that the Court had yet to consider whether the applicants were entitled to any alternative relief in light of the Court's finding of unfairness on the part of the respondents and, if so, what the form of that alternative relief should be.

11 It became apparent that if the only available alternative relief was compensation there could be no reason why the injunctive orders could not be dissolved. However, if it was open to the Court to grant some other form of relief, for example an extended period of notice, the applicants contended that it would be premature to dissolve the orders or to even amend them. It became necessary, therefore, in light of the respondents' insistence that the injunctive orders should be lifted, to consider whether, and if so in what form, the applicants were entitled to alternative relief given the Court's findings of unfairness in its judgment of 19 December 2002.

12 It may be seen from the submissions of the parties that, firstly, what the respondents contended was that the applicants are estopped from pursuing what the respondents referred to as, not alternative relief but rather, "post-judgment relief". However, it was submitted if the Court was to hold this was not so, the applicants must first seek and obtain leave to further amend the Third Further Amended Summons in accordance with the Court's Rules before being entitled to seek such relief.

13 The respondents take this position on the basis that the post-judgment relief was not part of the applicants' pleadings and given that the Court has refused the primary relief, the post-judgment relief is a "breathtakingly audacious" attempt by the applicants to re-formulate their claims and to seek to by-pass the Court's decision to refuse the primary relief.

14 The applicants contended, on the other hand, that the pleadings provide scope for the alternative relief they seek; that the respondents have been on notice from the outset that if the primary relief was refused they would be pursuing, by way of alternative relief, a "fair exit mechanism"; and, that the fact that the primary relief was refused is no barrier to the applicants seeking to pursue elements of that primary relief provided in doing so it is consistent with the Court's findings as to unfairness. The applicants submitted their claims for alternative relief were entirely consistent with the Court's findings in relation to unfairness.

15 The applicants contended that the Court's refusal of the primary relief had to be seen in the context of the claim for tenure or qualified tenure. That is, the Court refused the package of primary relief claimed by the applicants because the Court was not prepared to grant tenure or qualified tenure in respect of the dealership. It was submitted that in considering the question of alternative relief it would have been open to the Court to extract elements of the claims for primary relief and re-constitute them as alternative relief. However, the respondents had asked the Court that if it found there was unfairness but, nevertheless, refused the primary relief, the respondents should be given the opportunity of making further submissions on the question of alternative relief. The applicants were content with this course.

18 The Court considered that the appropriate course was to give the applicants leave to apply to amend their claims for alternative relief. In doing so, however, the Court said: 35 Before making any decision about whether to seek leave to amend, the applicants need to take into account the following two observations: Firstly, although I consider that significant elements of the alternative relief claimed by the applicants goes beyond anything that could have been reasonably anticipated from the third further amended summons, the applicants have made it clear from the outset, and the respondents have been on notice, that if the Court found unfairness but was not prepared to grant the primary relief sought by the applicants, an alternative claim for extended notice was a fallback position for the applicants. Moreover, the Court has made it clear that the alternative of extended notice was in contemplation. The respondents could not have been under any misapprehension about this and I do not consider that it is really necessary for the applicant to seek to amend for the purpose of claiming a period of extended notice. By this I mean that it is open to the applicants, by way of alternative relief, to pursue a claim that, in the circumstances, and given the findings of unfairness, 90 days' notice of termination is inadequate and the applicant should be given the opportunity by way of an extension of the 90 days' notice period, of extracting themselves from the dealership in a fair and dignified manner. The question of compensation and any variations to the contracts or arrangements that might underpin money orders would be a separate consideration subject to any other variations to the contracts or arrangements that might be made arising out of the findings of unfairness, findings that I regard as significant. I note that the applicants have, in effect, particularised their claim for actual extended notice by claiming 15 months.

36 The second observation I would make is this: The primary relief sought by the applicants has been refused and subject to a determination as to alternative relief, the Court does not intend to block the respondents' right to terminate the dealership beyond a period that is reasonable. Further, given the decision to refuse primary relief and the reasons underpinning that decision, it would be entirely inconsistent with that refusal to put in place an exit regime that overlooked the fact that the relationship between the applicants and respondents has broken down irretrievably. Moreover, if the Court were to consider as an alternative form of relief a period of actual extended notice, it would be the minimum the Court considered to be fair in the circumstances.

37 In other words, I consider that it is entirely open to the applicants to pursue, by way of alternative relief, compensation and an extended period of actual notice that is fair in the circumstances and perhaps in this respect the considerations in Crawford Fitting Co v Sydney Valve and Fitting Pty Ltd (1988) 14 NSWLR 438 are relevant. Any other form of relief claimed by the applicants would have to be consistent with the Court's decision to refuse the primary relief. In the light of these observations the applicants should re-visit the claims for alternative relief set out in their document of 30 January 2003.

38 I am not prepared to dissolve the injunctive orders at this stage although I consider there is scope for loosening the constraints on the respondents. I am not prepared to allow the respondents to move against the dealership in such a way that might interfere with the Court's treatment of the question of alternative relief. The parties are again directed to hold discussions with a view to reaching agreement on revising the terms of the orders made on 24 October 2001.

19 The Court made the following orders: 1. The applicants are given leave to apply to amend their claims for alternative relief in the light of the judgment of 19 December 2002 in these proceedings, namely, Gough & Gilmour Holdings Pty Limited & Ors v Caterpillar of Australia Limited & Anor (No. 11) [2002] NSWIRComm 354. 2. In the event that the applicants decide to seek leave it shall be by way of notice of motion to be filed and served by 4.00 pm 20 February 2003. 3. The proceedings are listed for further directions at 9.30 am on Monday 24 February 2003.

20 In Gough and Gilmour Holdings Pty Ltd and Ors v Caterpillar of Australia Ltd and Ors (No 14) [2003] NSWIRComm 44, the Court dealt with the question of the continuing injunction against the respondents. The Court said: 9 On 24 February 2003 the Court was informed that the parties had been unable to reach agreement on revising the terms of the injunction. The Court had hoped that some compromise position could have been reached between the parties that would allow for a loosening of the terms of the injunction but that has not been achievable.

10 It is a matter of significant concern to the Court that the respondents continue to be restrained in managing their business 16 months after the injunctive orders were made. However, given that the issue of relief has not yet been finally determined in this matter and that there is at least the prospect that the relief granted might be something other than compensation, it would be premature to dissolve the orders.

11 The question remains whether, in light of the parties' failure to agree on how the orders might be amended, the Court should do so and, if so, to what extent. I have given careful consideration to each of the elements of order 1. of the orders of 24 October 2001 and I have come to the view that the balance of convenience is in favour of leaving them in place until final determination in this matter and I so determine.

12 I note the proposal by the respondents made in a letter to the applicants' solicitors on 7 January 2003, no doubt in good faith, to substitute the injunction with an undertaking in the following terms: 1. The Respondents, whether by their respective servants or agents, undertake not to take any further steps to remove the Applicants from the Dealership for a further period of 90 days from 19 December 2002;

2. The Applicants each undertake jointly and severally to the Commission: (i) to submit to such orders as the Commission may consider to be just for the payment of compensation to be assessed by the Commission or as it may direct to any person, whether or not a party to the proceedings, affected by the operation of the undertaking referred to in 1 above; and (ii) to take all necessary steps with due expedition and diligence during the 90 day period referred to in 1 above towards exiting the Dealership.

13 It was later put by the respondents in the course of proceedings that it was open to the Court to use the proposed undertaking as the basis for an order to be substituted for the injunctive orders. I take the view, however, the undertaking would not provide sufficient protection to the applicants and any reference to a notice period would pre-empt the outcome of any determination regarding alternative relief. 14 Whilst I have expressed concern about how long this matter is taking to resolve, it is to be noted that the outstanding issue of alternative relief will be dealt with by the Court in proceedings scheduled for 25, 27 and 28 March 2003.

21 As it has already been explained, these proceedings were originally split into two parts. The first part was to "address the alleged unfairness of the contract… and whether it should be varied …" in the manner sought by the applicants. The second part was to deal with compensation issues if that became necessary. This was done because the Court took the view that, if the proceedings were not split, all of the evidence going to both unfairness and compensation, including extensive expert valuation evidence, would need to be adduced. If, however, the applicants were successful in achieving their primary relief, which involved them staying in the dealership, there would be no need to adduce evidence relevant only to the question of compensation because that question was unlikely to arise. Consequently, the Court considered that the proceedings might be expedited if they were split into two parts.

22 In the hearing of the first part of the proceedings, both parties reserved their respective rights to make further submissions regarding alternative forms of relief in the event the Court found unfairness but refused the applicants' primary relief. The Court acceded to those requests. With the emergence of the dispute over the alternative relief available to the applicants, the two part hearing has effectively developed into a three part hearing.

23 What is to be determined in this second part is also in dispute. The applicants submitted that the only issues that the Court has to determine at this stage are: (a) whether the applicants will be given leave to proceed in accordance with the Fourth Further Amended Summons for Relief; and (b) whether the applicants should be granted their notice period claims and their sale process provision claims because they are the only claims that have any relevance to the timing of and/or the terms upon which the Overall Arrangement (including the agreements) will come to an end.

24 The respondents, on the other hand, submitted that the issues for determination are: (a) whether the applicants ought be granted leave to amend the Third Summons; (b) if the applicants ought be granted leave to amend the Third Summons, whether the applicants ought be granted the Post-Judgment Relief; (c) whether the injunction is to be dissolved. It is to be noted that the respondents referred to the alternative relief being sought by the applicants as "post-judgment relief", that is, the relief being sought post the judgment relating to primary relief handed down on 19 December 2002.

25 The effect of the applicants' approach to what is to be determined at this stage of the proceedings was addressed in their submissions in the following terms: [S]uch an approach resolves the difficulty averted to by the Court in Decision No 12 (at paragraph 20) as it would result in all the so called "notional" variations (ie those that could only support an order for compensation as opposed to extra time in the dealership) being considered at the one time and when the relationship has in fact come to an end. At that point in time the Court could, of course, elect to set aside the Overall Arrangement (and/or the Agreements) and then proceed to assess "just" compensation without the need to further vary the Overall Arrangement (and/or the Agreements) at all. The suggested variations could then be considered as reflecting the unfair shortcomings in the Overall Arrangement (and/or the Agreements) and be considered along with the other complaints about the Overall Arrangement (and/or the Agreements) as set out in the Third Further Amended Summons and in the proposed Fourth Further Amended Summons.

26 The respondents submitted that the applicants approach was inconsistent with that determined by the Court in its 'split hearing' judgment. It was submitted: [A] careful and proper review of the circumstances leading to the split hearing and the basis upon which the orders were made and the trial [that] was conducted thereafter, demonstrates plainly that it was submitted by the Applicants, and determined by the Court, that all questions of variation and/or setting aside would be determined in the first part of the split hearing. When one reflects upon this determination it is, with respect, neither remarkable nor surprising. At the time, the Court would never have contemplated splitting issues of variation or setting aside into different parts of the case, because so to conclude would inevitably have led to the conclusion that splitting the case was inappropriate. So much was obvious to all and explains in part why the Applicants were anxious to defeat the Respondents' opposition to the application by re-emphasising the point in reply.

27 The issues to be determined in this stage of the proceedings will be as submitted by the respondents. That is: (a) whether the applicants ought be granted leave to amend the third further amended summons; (b) if the applicants ought be granted leave to amend the third further amended summons, whether the applicants ought be granted the alternative relief sought in the proposed fourth further amended summons; (c) whether the injunction is to be dissolved.

28 The alternative relief sought by the applicants is set out in the proposed fourth further amended summons filed on 20 February 2003. Whereas Schedule A to the third further amended summons set out the primary relief sought by the applicants, Schedule B to the fourth further amended summons proposed, in the alternative to Schedule A, a formula for relief said to be consistent with the findings in the primary judgment. The applicants submitted, however, that by seeking to amend the third further amended summons, inter alia, to introduce Schedule B it was not to be taken as having acquiesced to and accepted that: (a) any such amendments are a necessary prerequisite to the applicants pressing such claims for alternative relief; (b) the findings about the relationship having broken down irretrievably and the consequent need for this relationship to end soon (in spite of the findings of non compliance with the last resort policy and the Fourth Assurance) are correct; and (c) clauses 3 to 4 in Schedule B represent what the applicants believe to be the most appropriate form of variation (as to termination) to remedy the unfairness found in this case.

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.

5. 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

31 Before going to the various elements of relief sought by the applicants in their fourth further amended summons, there were a number of issues raised by the parties in the course of their submissions that need to be addressed in a preliminary way.

32 Clauses 1, 2, 10 and 11 of Schedule B were said by the applicants to have no real work to do and would only sound in compensation. That is, if the Court were to make orders in the terms of these clauses in order to address the unfairness found in the primary judgment, there would be no obligation on the respondents to, for example, implement an improvement plan under cl 11 because by virtue of the other provisions of Schedule B the dealership would either have been sold or notices of termination issued. The variations to the overall arrangement in the form of cll 1, 2, 10 and 11 would constitute the basis for the making of money orders under s 106(5) of the Act.

33 The applicants referred to the variations in respect of cll 1, 2, 10 and 11 as "notional variations". The respondents contended that the legislation does not, and nor should it, admit of any such concept. The respondents submitted that the applicants were not seeking the provisions in the clauses referred to in order to remedy any unfairness but were simply seeking to establish a "gateway" for a claim for compensation. It was submitted that: Section 106 of the Act provides the Court with the power to vary the contract where that contract is found to be an unfair contract. If the Court makes an order varying a contract, then that contract takes effect as varied and operates, according to its terms, as varied. Either an order is made varying the contract or it is not. A notional variation is a fiction which is not authorised or contemplated by the Act. The Commission is not empowered to insert a term in a contract for the sole purpose of awarding compensation. The purpose of varying the contract is to remedy the unfairness found in a particular case. See generally Virtue v NSW Department of Education & Training (1999) 91 IR at 428.

34 The applicants asserted, on the other hand, that the variations were consistent with the normal approach to section 106 cases. The applicants submitted: [T]he variations are consistent with the normal approach to section 106 cases. The approach involves (after finding jurisdiction and unfairness) a consideration of avoidance and variation prior to compensation (see: Stevenson v Barham (1977) 136 CLR 190 at 201; Virtue v New South Wales Department of Education and Training (1999) 92 IR 428 at 429 and Westfield Holdings Limited v Adams (2001) 114 IR 241 at 269 [124]). The approach, in cases where the impugned contract has come to an end, involves the making of "notional" variations (such as deleting a term of one months' notice of termination and inserting a term of 12 months' notice of termination) prior to the making of compensation orders (such as the provision of compensation representing 11 months' pay, less any mitigation of loss). The claim for such "notional" variations is not for a wholly irrelevant purpose - on the contrary, they correct unfairness and provide a basis for assessing compensation. Furthermore, as the Applicants have already submitted to the Court, if there be any legitimate concern or reservation on the part of the Court about varying the standard form contracts having a "worldwide operation" - a matter that the Applicants contend is irrelevant given that the Respondents must operate in New South Wales in accordance with the laws of the State including section 106: see Avis v Australian Mutual Provident Society (Unreported), Schmidt J, CT 1310 of 1995 21 December (1995) - then the Court can (of course) vary the Overall Arrangement (but not the Agreements).

35 I agree with the respondents that in making orders varying a contract or arrangement the motivation cannot be to establish a gateway to money orders under s 106(5). Any order under s 106(1) must be for the purpose of remedying unfairness. For example, the Full Bench in Westfield v Helprin (1998) 82 IR 411 agreed with Marks J's conclusion at first instance that Mr Helprin's contract was unfair in that it did not require a counselling and warning process, including an opportunity for Mr Helprin to improve his performance, prior to the exercise of the right of termination. Both Marks J and the Full Bench considered it appropriate to vary the contract to incorporate a requirement that the respondent provide the applicant with a period in which to improve his performance. Now, of course the contractual relationship between Mr Helprin and his employer had ended and in varying the contract to provide him with an opportunity to improve his performance it was not countenanced that he would actually do so. But the variation to remedy the unfairness in Mr Helprin's case enabled the Court to make a consequential order awarding monetary compensation to reflect the respondent's failure to provide that opportunity.

36 This, as I understood it, was what the applicants meant by "notional variation". If it can be shown that the dealership agreements and/or overall arrangement should be varied in the terms of cll 1, 2, 10 and 11 of Schedule B in order to remedy any unfairness, notwithstanding the fact that the respondents might not be required to actually fulfil any obligation under those provisions, I cannot see any bar to making the variations. Whether the Court would proceed to make consequential money orders under s 106(5) would be a matter for the Court's discretion. Whether Schedule B has already been determined

37 It is necessary to deal with the respondents' contentions that Schedule B was simply Schedule A in a different guise and that Schedule A had been comprehensively rejected by the Court in its primary judgment when the Court refused the applicants' primary relief. The respondents submitted that the applicants were seeking to re-agitate issues already determined by the Court in its primary judgment; that it was "a thinly disguised attempt to re-run the case." The respondents contended that the applicants were estopped from amending the pleadings to introduce Schedule B because it had already been determined.

38 I do not propose to canvass the extensive submissions made by the parties in relation to this matter. However, I wish to make it clear that in rejecting the primary relief sought by the applicants in these proceedings I did so on the basis that I regarded the alternative proposals for primary relief as "packages". I did not see it as my task to divide the packages or select from them elements to correct particular incidents of unfairness or to re-jig the packages in order to address any unfairness. I can see no objection in principle to the applicants now selecting elements of the claim for primary relief in order to achieve some alternative form of relief provided that the "package" of alternative relief is not the primary relief in another guise.

39 The respondents, of course, say it is. And, I must say, the claim for a notice period of five years gave me some cause for concern in that regard. However, I consider that the applicants have been careful to attempt to target and configure the relief in Schedule B to the findings of unfairness in the primary judgment and that it cannot, therefore, be contended, as a general proposition, that Schedule B is Schedule A dressed up differently in order for the applicants to re-run their case.

40 After referring to findings in the primary judgment regarding the applicants' "ongoing and wilful disregard for the importance of cooperation, trust, confidence and respect in the relationship, such disregard being characteristic of the applicants' conduct" (see par [780 (11)(d)]), the respondents submitted that: [T]he conduct of the applicants constituting a sustained course of wilful disregard of core obligations constitutes, according to the law of contracts, a clear repudiation of the contract itself.

41 The respondents referred to Shevill v The Builders' Licensing Board (1982) 149 CLR 620 where Gibbs CJ said at 625: As Lord Wright pointed out in Heyman v Darwins Ltd [1942] AC 356 at 378, repudiation is an ambiguous word and is used in various senses. We are of course concerned only with a case in which it is admitted that there was a valid and binding contract. Such a contract may be repudiated if one party renounces his liabilities under it - if he evinces an intention no longer to be bound by the contract ( Freeth v Burr (1874) LR 9 CP 208 at 213) or shows that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way ( Ross T Smith & Co Ltd v T D Bailey, Son & Co [1940] 3 All ER 60 at 72); Carr v J A Berriman Pty Ltd (1953) 89 CLR 327 at 351). In such a case the innocent party is entitled to accept the repudiation, thereby discharging himself from further performance.

42 The respondents also referred to Laurinda Pty Ltd v Capalaba Shopping Centre Pty Ltd (1989) 166 CLR 623 at 634 per Mason CJ; Alghussein Establishment v Eton College [1988] 1 WLR 587 at 591 to 595; Drinkwater v Caddyrack Pty Ltd (unreported, Young J SCNSW, 3970 of 1996, 25 September 1997). Mr Hall QC submitted that three propositions could be drawn from the cases: The first is that conduct which is in breach of primary obligations by a party to a contract is contractually wrong conduct. Secondly, that conduct that has a wilful element about it places the conduct in the category which directly raises the question as to whether the party is entitled to rely upon that conduct in a court of law later for relief.

Thirdly, that conduct of that type disentitles the party to claim a benefit in any way arising, that is directly or indirectly, or consequent upon the conduct and that has been referred to in a decision I will take your Honour to, that is the prevention principle.

43 Mr Hall further submitted: Now, your Honour, the conjunction of the principles here is that both conduct that is contrary to the primary allegations under the contract, and the way the contract is required to be performed, and where that conduct, in particular, is of the kind that is wrong in terms of its wilfulness, a wilful disregard of those obligations, it both constitutes repudiation of the contract and prevents a party then seeking to say: "Well, now we are in termination mode", that is "Now there are grounds for terminating this for our conduct, we seek the benefit of the court to protect us from termination consequent upon our conduct, by having the court grant an indulgence to us. We want now your rights to terminate, limited in a way which will benefit us, in terms of alternative relief benefit, in the sense that it will prevent termination, other than on a five year basis, it will provide, whether under schedule A or schedule B, rights, continuing benefits under the contract notwithstanding that it is our conduct that has precipitated and provided the grounds as found by the court, for the justification in taking a termination action. For, in our submission, that must be terminating for good cause. Notwithstanding that, we are entitled to move the court to come to our aid, to put in buyer of last resort provision, so that the sale doesn't go through."

It will put in place, ironically enough, relationship management provisions; it will put in place dispute resolution provisions, "so that if we dispute and fall out of line with you, Caterpillar, over any matter arising from termination, you will be subjected to third party determination and such like matters."

There is an interdependence here between the former contractual relief sought at the hand of this court as discretionary exercise of the powers vested in this court to benefit, enhance, enrich the applicants upon a false assumption, which we have identified earlier, in our respectful submission, that they firstly have an interest they have an entitlement that deserves to be protected, and secondly, that notwithstanding their conduct, they warrant, they deserve, they have an entitlement, notwithstanding their disentitling conduct, to the exercise by a judge of this jurisdiction, a superior court of record, of a protective regime in consequence of their own conduct.

44 Mr Connock of counsel for the respondents also submitted that contractual principles are such that termination based on an invalid ground is not ineffective if it can be justified on some other ground. Mr Connock referred to Sheppard v Felt Textiles of Australia Limited (1931) 45 CLR 359 at 377-378 and Sunbird Plaza Pty Ltd v Maloney (1989) 166 CLR 245 at 262, 274 and 275.

45 I do not accept that I should approach this matter on the basis that the applicants repudiated the contracts with the respondents by demonstrating wilful disregard for obligations of cooperation, trust, confidence and respect. Firstly, I did not make any express finding in the primary judgment that the applicants breached any implied term of cooperation, trust, confidence and respect and that, therefore, the applicants repudiated their contracts and the respondents accepted that repudiation. I did not find that the applicants were guilty of serious and wilful misconduct such as to repudiate their contracts with the respondents but only wilful disregard of certain important obligations towards the respondents. In this regard, I note what Wilson J said in Shevill at 633: Repudiation of a contract is a serious matter and is not to be lightly found or inferred: Ross T Smyth & Co Limited v TD Bailey Son & Co [1940] 3 All ER 60 at 71. In considering it, one must look to all the circumstances of the case to see whether the conduct "amounts to a renunciation, to an absolute refusal to perform the contract": Mersey Steel & Iron Co v Naylor, Benzon & Co (1884) 9 App Cas 434 at 439.

46 Secondly, whilst the principles of common law and equity referred to by the respondents in relation to repudiation may be helpful in certain circumstances, what I am required to do is consider the conduct of both parties and, in the context of a claim by one party that the other party has acted unfairly, weigh up how that unfairness might be rectified. If I were to find that the conduct of the complaining party was such that it negatived any need to redress the unfair conduct of the other party, it would be open to me in my discretion not to grant any relief. In the present proceedings I have found that the applicants' conduct was such that it deprived them of their primary relief, that is, tenure or qualified tenure of the dealership. Nonetheless, the respondents committed two significant acts of unfairness against the applicants and I am required to consider whether, short of granting the applicants their primary relief, they are entitled to some other form of relief. That is the subject matter of this judgment.

47 As I have noted, the respondents placed reliance on the general principle in Sheppard v Felt Textiles of Australia Limited (1931) 45 CLR 359 and Sunbird Plaza Pty Limited v Maloney (1989) 166 CLR 245 that in certain circumstances a termination may be justified by reference to any ground that was valid at the time and even though the ground relied upon was without substance. Given that I do not accept the respondent's submission that the applicants repudiated their contracts with the first respondent, Shepherd and Sunbird Plaza are not relevant.

48 The respondents submitted that it would be a "bizarre result" if, in light of the applicants' "disentitling conduct", the applicants were to succeed in the claims for alternative relief. Mr Hall submitted [O]therwise you risk turning the commercial community in this state completely upside down. You would have commercial corporations, whatever their conduct, whatever their adherence or non-adherence to their primary obligations they would be knocking on the doors of this court and saying, "Protect us". In our submission, it is the width of powers we acknowledge are there. We don't for a moment suggest they are not there. It is the way in which, and the principles upon which the discretion is to be exercised.

49 I am particularly conscious of the need to exercise the power under s 106 in these proceedings not only judicially but also, hopefully, with the "good sense" adverted to by Barwick CJ in Stevenson v Barham (1977) 136 CLR 190 at 192. But as I have already sought to explain this is not a case, as the respondents would have it, where the applicants have wilfully ignored important relationship obligations and want the Court to reward them or protect them. There is substantially more to it than that simple scenario. The primary relief sought by the applicants has been refused. That is, the Court has decided that the applicants cannot hold onto the dealership. The question is whether, because of the respondents' unfair conduct, a matter that the respondents tended to marginalise in their submissions, the applicants are entitled to some form of relief. If the Court decides in this judgment to grant some form of relief it will be in accordance with the principles and practice established under s 106 and its predecessors over the past 45 years and I do not expect it would open the floodgates to litigation.

50 The respondents also submitted that the public interest is in favour of keeping businessmen to their bargains and reliance was placed on Westfield Holdings v Adams (2001) 114 IR 241 at 251. That is, the dealership agreements were carefully drafted and the applicants when they entered into those agreements understood clearly what they were agreeing to, not only because specific terms (including cl 29(a)) were explained to them but also because the applicants had a bevy of advisers who ensured the terms of the agreements were made plain to the applicants. Regardless of whether the dealership agreements were fair when they were entered into - and this raises the question of whether 90 days' notice is fair in all circumstances of termination - the agreements, as part of an overall arrangement, subsequently became unfair because of the conduct of the respondents. In the context of the application of s 106 businesspeople cannot be expected to sit on their hands and take no action if subsequent conduct by another party to the bargain has rendered it unfair.

51 In its interlocutory judgment No 13, in granting leave to the applicants to apply to amend their claims for alternative relief, the Court said at pars [31] to [34]: 31 In the absence of anything more, and given the extensive submissions that have been put to the Court on this issue, I have come to the conclusion that it could not be said that the respondents were on notice of the raft of alternative claims contained in the applicants' document filed in proceedings on 24 January 2003 and later revised on 30 January 2003. It would have been very difficult, if not impossible, for the respondents to have anticipated the alternative relief in all its permutations now claimed by the applicants which, although it is said was formulated on the basis of the Court's findings of unfairness, reflect a considerable degree of ingenuity and innovation that could not have reasonably been apparent from the claims in the third further amended summons. It would be grossly unfair for the respondents to now have to meet the claims for alternative relief not having had proper notice of them.

32 On the other hand, it must be acknowledged that it would have been very difficult for the applicants to formulate the alternative relief in this case until it was known what the Court's findings were in relation to unfairness.

33 The applicants submitted that there was no obligation on them to seek to amend the pleadings because with the handing down of the substantive judgment on 19 December 2002 the evidentiary case was closed. I do not agree. This case was always going to be conducted in two parts. The appropriate course for the applicants to have followed would have been, in their original pleadings, to reserve the right to add to or otherwise modify their claim in light of the Court's rulings on unfairness and in doing so not limit that reservation to the question of compensation, as was the case in the third further amended summons. Then, in the light of the Court's findings regarding unfairness, the applicants should have applied to amend their pleadings in accordance with the Commission's Rules. Alternatively, in the absence of having reserved the question in the original pleadings, it would have been open to the applicants to seek leave to amend their pleadings on the grounds that given the findings of unfairness the applicants were now in a position to fashion the claim for alternative relief in an informed way. 34 It would, of course, as the respondents properly acknowledge, be open to the Court to now invite the applicants to amend the pleadings or for the Court to do so on its own motion. Despite the fact that it may have the effect of delaying final closure of these proceedings, a matter that I have previously expressed concern about, I consider the appropriate course is to provide the applicants with the opportunity to amend in light of the judgment of 19 December 2002.

52 The question now for the Court is whether it should grant leave to amend in the terms sought in the proposed fourth further amended summons for relief. In relation to that question there is no issue between the parties that the Court has power to amend (see s 170 of the Act and r 148 of the Industrial Relations Commission Rules 1996. See also O'Brien v Australian Native Landscapes Pty Limited (2001) 105 IR 409 at 416 [11]). The power may be exercised "at any stage of any proceedings" (see: s 170(2)(a) of the Act and r 148(1) of the Commission's Rules). The power is to be exercised in such manner as the Court considers "to be necessary in the interests of justice" (see: s 170(1) of the Act and r 148(1) of the Rules).

53 The applicants submitted the proposed amendments fell into five broad categories: (1) Amendments reflecting the joinder of the Third and Fourth Respondents to the proceedings pursuant to Decision No 12 [2002] NSWIRC 379. (2) Amendments incorporating a new Schedule B to the summons outlining variations to the Agreements to redress the unfairness found by the Court in the Judgment. (3) Amendments concerning compensation (in a variety of contingencies) to be considered in the second phase of the hearing. (4) Amendments seeking a section 107 order of a limited nature to reflect variations that may be made to the Agreements. (5) Amendments reserving the rights of the Applicants to amend the summons to reflect any further findings of the Court.

54 There was no issue between the parties on the granting of leave to amend on the proposed amendments to reflect the joinder of the third and fourth respondents. Further, it would seem that the respondents accept that the refusal of the grant of leave to amend on the proposed amendments concerning compensation may be premature. In this regard, the respondents submitted: …it is probably fair to say that it may be premature to reject all of those proposed amendments at this juncture as the Court's determination in relation to the alternative relief, even if it is all refused, may bear upon the question in a slightly different way.

55 It was also common ground that justice is the paramount consideration in determining how the discretion to amend is to be exercised: Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146 at 155 per Dawson, Gaudron and McHugh JJ. 56 The applicants submitted there were a number of factors relevant to the exercise of power to amend, including: (a) whether the proposed amendment is mala fide (see: National Australia Bank Limited v Nobile (1991) 100 ALR 227 at 236); (b) whether the proposed amendment is futile (see: TCN Channel 9 Pty Limited v Antoniadis (1998) 44 NSWLR 682 at 691, 695); (c) whether the proposed amendment is necessary to formally shape the issues in accordance with the way in which the parties regarded them at trial (see: Balmain New Ferry Co Limited v Robertson (1906) 4 CLR 379 at 392; Leotta v Public Transport Commission (NSW) (1976) 9 ALR 437 at 446); (d) whether the proposed amendment is necessary to make the allegations conform to the evidence actually given (see: Leotta v Public Transport Commission (NSW) (1976) 9 ALR 437 at 446; see also Decision No 13 at 34); (e) whether the proposed amendment requires further evidence to support it (see: Queensland v J L Holdings Pty Limited (1997) 189 CLR 146 at 171; TCN Channel 9 Pty Limited v Antoniadis (1998) 44 NSWLR 682 at 695); and (f) whether the proposed amendment causes prejudice to the parties (that is, both the Applicants and the Respondents) (see: Macquarie Bank Limited v National Mutual Life Association of Australia Limited (1996) 40 NSWLR 543 at 555, 604-605; see also National Australia Bank Limited v Nobile (1988) 100 ALR 227 at 236). The applicants submitted that each of these factors was answerable in the negative.

57 The respondents canvassed extensively the principles applying to amendments to pleadings, including: · A Court is not precluded from permitting amendment after judgment has been pronounced: Boschetti v Carr [2000] WASC 228 at [21]-[26] per Hasluck J; Singh v Atombrook Ltd [1989] 1 All ER 385 at 390 per Kerr LJ; F F Seeley Nominees Pty Ltd v El Ar Initiations (UK) Ltd (No 2) (1990) 55 SASR 314;

· An amendment which is brought forward for the first time after the conclusion of the trial faces special difficulties: Mercantile Mutual Insurance (Australia) Ltd v Farrington (1996) 44 NSWLR 634 at 651 per Bryson J;

· An amendment will not be allowed after the delivery of judgment, if the point raised by the amendment could have been met by the other party by evidence: F F Seeley Nominees Pty Ltd v El Ar Initiations (UK) Ltd (No 2) (1990) 55 SASR 314 at 315 per Zelling J;

· The Court's power to allow amendment is discretionary: Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146 at 167 per Kirby J; Mercantile Mutual Insurance (Australia) Ltd v Farrington (1996) 44 NSWLR 634 at 651 per Bryson J; Commonwealth Bank of Australia v Mehta (1991) 23 NSWLR 84 at 107 per Waddell A-JA (with whom Samuels and Meagher JJA agreed generally);

· Where an application to amend is made prior to the conclusion of the trial (and often prior even to its commencement), leave to amend is generally granted if the point can be raised without injustice to the other party. Whilst that question may depend upon whether disadvantage to the other party can be avoided by adjournment or an appropriate costs order, other issues may also be relevant. Such matters include the effect of the litigation on the parties, the pressure on the courts, and the public interest in the efficient conduct of legal business: The Commonwealth v Verwayen (1990) 170 CLR 394 at 482 per Gaudron J; see also at 464 per Toohey J;

· An amendment may be refused because it is made at such a late stage that neither costs nor an adjournment can compensate the other side for the failure to raise the issue at an earlier stage: The Commonwealth v Verwayen (1990) 170 CLR 394 at 456 per Dawson J; Brooks v Wyatt (1994) 99 NTR 12 at 21 per Kearney J. If the prejudice to the other party occasioned by the amendment cannot be cured/compensated, the amendment must be refused: Mehta v Commonwealth Bank of Australia (1990) ATPR 41-026 at 51,420 per Rogers CJ (upheld on appeal in respect of the amendment issue: Commonwealth Bank of Australia v Mehta (1991) 23 NSWLR 84); Campbell v Metway Leasing Limited (1998) ATPR 41-630 at 40,920-40,921 per McInerney J;

· An amendment which is futile because it is obviously bad in law will not be allowed: The Commonwealth v Verwayen (1990) 170 CLR 394 at 456 per Dawson J; Brooks v Wyatt (1994) 99 NTR 12 at 21 per Kearney J; Campbell v Metway Leasing Limited (1998) ATPR 41-630 at 40,920-40,921 per McInerney J.

58 The respondents submitted that when regard is had to the principles referred to above, the applicants' application for leave to amend ought be refused because: (1) The application has been made after the conclusion of the hearing and after the publication of reasons and judgment in relation to the first part of the split hearing. Accordingly, the application stands on a different footing to that made during trial. (2) The points raised by the proposed amendments could have been met by evidence and would have been the subject of cross examination. (3) The applicants have been guilty of inordinate delay. The pleadings having been on foot since October 2000 with the application not being made until February 2003 and then only as a result of a direction by the Court. This approach was adopted in circumstances where the Court found, as was the fact, that the approach taken and proposed to be taken by the Applicants in connection with the proposed amendments was grossly unfair to the respondents. (4) As a result of the completion of the hearing and the delivery and publication of the reasons for judgment, the prejudice suffered by the respondents cannot be cured or compensated for. (5) In any event, the proposed amendments would be futile. (6) In the circumstances, the applicants cannot discharge the onus they bear of persuading the Court that it is just to allow the amendments. The respondents elaborated on each of these contentions.

59 The Court has conducted a lengthy trial in relation to the applicants' claims for relief in the third further amended summons. It found that whilst there was unfairness it was not of such a nature and extent as to justify granting the applicants the primary relief they sought. For the reasons earlier explained, the applicants now seek to amend their claims in order that they might gain relief for the unfairness found by the Court in its primary judgment. Should the applicants be entitled to amend their pleadings in the manner set out in the proposed fourth further amended summons? 60 The principal concern I have about granting leave is the potential for it to prejudice the respondents and thereby cause injustice. The respondents submitted that: [T]he incurable prejudice suffered by the Respondents relates to the issue of cross examination and the calling of evidence. At no stage prior to the end of January 2003 were the Respondents aware of the alternative claims to be sought by the Applicants and they did not anticipate them … Moreover, the Court has determined that the Respondents were not on notice of the claims and that it would have been difficult if not impossible to have anticipated them. It is not open to the Applicants to contest or ignore this finding, as they seek to do in their submissions.

61 In this respect, the respondents referred to what the Court said in its interlocutory judgment No 13 at par [31]: It could not be said that the respondents were on notice of the raft of alternative claims contained in the applicants' document filed in proceedings on 24 January 2003 and later revised on 30 January 2003. It would have been very difficult, if not impossible, for the respondents to have anticipated the alternative relief in all its permutations now claimed by the applicants which, although it is said was formulated on the basis of the Court's findings of unfairness, reflect a considerable degree of ingenuity and innovation that could not have reasonably been apparent from the claims in the Third Further Amended Summons. It would be grossly unfair for the respondents to now have to meet the claims for alternative relief not having had proper notice of them.

62 The respondents tendered a list of some 47 potential topics that may have been the subject of evidence/cross examination if they had been previously aware of the amended claims in the applicants' proposed fourth further amended summons. The respondents submitted, however, that: It is not in this case … open to the Court or a party, to seek to re-open its case after judgment or to seek to further cross examine witnesses after judgment and thereafter: (1) allow the parties to make submissions as to how the Court's judgment ought be altered, amended or supplemented; (2) for the Court to alter, amend or supplement its judgment in light of that further evidence, cross examination and submissions.

63 In relation to what the Court stated in par [31] of its interlocutory judgment No 13 quoted above, the applicants are correct when they said: [T]he conclusions in Decision No 13 at paragraph 31 centre upon the form of the alternative relief claimed, as opposed to the issues underlying the form of the alternative relief claimed. Significantly, the Court has not suggested that the issues underlying the form of alternative relief were novel (or displayed "ingenuity" or "innovation"), a matter not disputed by the Respondents … This fact highlights that the Court is concerned with the fashioning of relief, as opposed to the agitation of new issues. Moreover, the Respondents are unable to assert that the issues underlying the form of alternative relief were not previously raised - for the Respondents to do so would entail that their claims of res judicata , issue estoppel and Anshun estoppel must fail. The fact that the issues underlying the form of alternative relief were raised at trial is most material to any claimed prejudice by the Respondents.

64 The concern that the Court was expressing in par [31] of its 13th judgment was that the respondents had not been put on notice as to the alternative form of relief sought by the applicants and that it would have been grossly unfair for the Court to simply allow the applicants to proceed - as they proposed to do at the time - with submissions in support of that alternative relief without giving the respondents proper notice of such relief. However, the issues underlying the alternative relief sought by the applicants were not new issues. I consider that the substantive claims relating the notice period, the sale process, the last resort policy, the improvement plan were all matters agitated at trial.

65 Moreover, it needs to be considered that given the factually complex nature of the proceedings and the many issues that had to be addressed, it would have been difficult for the applicants to predict with any great precision what might be the nature of the Court's findings in relation to unfairness and, therefore, how they should fashion their alternative relief in the event the Court refused the primary relief. Provided that in re-fashioning their relief to meet the findings of unfairness the applicants did not raise new issues not ventilated at trial, and provided the respondents had received proper notice of the re-fashioned relief, I can see no barrier to granting the application to amend.

66 The respondents contended, however, that in light of the proposed fourth further amended summons there are a number of issues that would have been the subject of further evidence/cross examination in the substantive proceedings. This is the list of 47 potential topics referred to earlier. I have given careful consideration to that list and in light of the decisions I have come to in this judgment I do not consider that the inability of the respondents to pursue the 47 topics causes them any prejudice. For example, the respondents submitted they would have pursued in evidence/cross examination the suitability of Messrs Coonan and Owens as umpires/mediators and the practicability of the proposed dispute resolution procedure. In this respect, I have refused to make orders varying the overall arrangements in the terms of clause 9 of Schedule B of the proposed fourth further amended summons and so the appointment of these two gentlemen and the operation of the disputes procedure is not an issue. I have also refused the buyer of last resort provision and the proposed relationship management provision in respect of which the respondents contended they had some seven issues for evidence/cross examination.

67 It follows that I do not propose to allow further evidence to be called and thereby cause any delay in finalising these proceedings.

68 As to their contentions regarding futility, the respondents submitted: If the Court accepts the Respondents' submissions that the Post-Judgment Relief ought not be granted then it follows inexorably that the amendments will be futile and must be refused. Alternatively, if the Court was minded to grant some form of alternative relief (for example, a shortly extended notice period) then any leave to be granted would, of necessity, be limited to that relief. This, of course, is because the Court will have determined that the balance of the relief is not to be granted and therefore any amendments relating to that relief are also rendered futile.

69 The respondents' submissions regarding futility are certainly one way of approaching the issue. However, because of the interdependence or inter-connection of the various elements of relief sought in Schedule B to the fourth further amended summons, it is not a simple matter of deciding that, because one element is to be refused, leave to amend in respect of that element will also be refused. I would prefer the approach of granting leave to amend in respect of all of the Schedule B amendments and explaining why some of the amendments have been refused and why others have been granted and then how the final relief all fits together.

Proposed amendments in relation to orders under s 107

70 The applicants sought to amend the third further amended summons by seeking orders under s 107. Unlike Schedule B, I consider these proposed amendments can be dealt with separately and in the context of whether leave to amend should be granted. In this respect, notwithstanding the fact that in its primary judgment the Court refused to make orders under s 107 of the Act, the applicants submitted: the Court did not rule out in the (primary) Judgment the prospect of a variation under section 107 of the Act in relation to a particular clause(s) of the Agreements (such as, for example, clause 29) (see: paragraphs 798 to 800 of the Judgment). The Court refused to grant a "blanket order under section 107 banning the use of Caterpillar's standard form contracts in New South Wales" (see: paragraph 800 of the Judgment) but noted that it was "yet to consider the question of the 90 days' provision in the context of whether some alternative form of relief should be granted to the applicants" (see: paragraph 799 of the Judgment). A res judicata estoppel does not arise because of the terms of order 3 made in the Judgment (see: paragraph 805 of the Judgment). An issue estoppel does not arise because of a lack of final ruling on this issue. An Anshun estoppel does not arise as the Court has, prior to a final judgment on all issues, afforded the Applicant an opportunity to raise alternative relief and, in any event, the claim is made in the current proceedings, not subsequent proceedings. Additionally, in terms of the fourth category of proposed amendments, the variations are not inconsistent with the finding of the Court that the relationship between the parties has "broken down irretrievably" as they would only operate in relation to a new dealership agreement with any incoming dealer and would not lead to a continuation of the (current) Agreements.

71 The respondents submitted in relation to the amended claim for orders under s 107 that it: …overlooks the Court's determination at paragraph 799 of the Primary Judgment that "there is nothing so inherently unfair in the Dealership Agreements that would cause the Court to vary them pursuant to section 107". That finding refers to the entirety of the agreements and its meaning is plain on its face. It is a good example of the res judicata doctrine. The issue has been adjudicated upon and cannot be relitigated. The amendment is futile.

72 In their fourth further amended summons the applicants sought an order under s 107 as follows: In the event that the Court makes an order varying the Agreements then the applicants seek an order pursuant to section 107 that the respondents be prohibited from entering into any dealership agreements to operate in whole or in part of New South Wales in the form of the Agreements unless varied in accordance with the Court's order.

73 The Court does not propose to grant leave to the applicants to amend their claims for orders under s 107 of the Act. Firstly, the Court does not intend to vary the dealership agreements but only the overall arrangement. Secondly, what might be unfair in this case might not be unfair in other circumstances. It is not the case that the Court has found that the 90 days' notice of termination provision without cause in the dealership agreements is unfair per se.

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.

75 As far as the Court is concerned it has made a final judgment about the applicants' primary relief claim and about the issue of unfairness. The Court has refused the claim for primary relief for the reasons expressed in the primary judgment and it has found that the conduct of the respondents was unfair. Those findings cannot be re-visited other than by way of appeal and it would seem the time for that has passed.

76 In its primary judgment, the Court acceded to a request by the parties that before the Court proceeded to make any decision regarding the question of alternative relief they should be given an opportunity of addressing the Court on that issue. The parties have had the opportunity of seeking leave to call any further evidence regarding the question of alternative relief (other than matters relating to compensation) and the applicants have had a full opportunity to seek any further findings in relation to that relief (other than matters relating to compensation). No further evidence has been called and, other than the issue of accumulated goodwill, the applicants have not expressly sought any further findings. Other than in relation to compensation issues the door is closed on further evidence and the Court declines to amend the pleadings reserving the rights of the applicants to amend the summons to reflect any further findings of the Court.

77 In relation to the question of accumulated goodwill, the applicants submitted: In the event that the Court is not disposed to vary the Overall Arrangement to introduce the claimed sale process provisions for reasons associated with the Court's findings as to the irreconcilable breakdown in the relationship, then it would nevertheless be open to the Court to vary the Overall Arrangement so as to introduce a stand alone Buyer of Last Resort provision moulded from clause 6(c) of Schedule B. In such circumstances the obligation to offer to purchase the business could then be added to clause 5 of Schedule B. In the event that the Court is not prepared to introduce sale process provisions or even a stand alone Buyer of Last Resort provision then, if the dealership business is not in fact sold prior to phase 2 of these proceedings, then the Applicants will then press their claim for compensation for loss of the dealership business (including the value of accumulated goodwill) during that phase of these proceedings.

The Court has, on several occasions, ruled that unfairness exists when an agency or dealership agreement is terminated in circumstances where such termination deprives the Applicants of the right or opportunity to sell the business for value ... Accordingly, if the Court (for whatever reason) is not mindful to provide the Applicants with a further Fourth Assurance opportunity to sell the business then the Applicants submit that a fair remedy in the prevailing circumstances would nevertheless involve the introduction of a Buyer of Last Resort requirement as that is still feasible (and appropriate). Contrast the situation prevailing Avis v Australian Mutual Provident [1997] NSWIRComm 182; Attard v Bridges Financial Services (2000) NSWIRComm 242; and in Canberra Star Motors Pty Limited v Chrysler Jeep Automotive Australia Pty Limited [1999] NSWIRComm 310 where the relationships had already come to an end by the time those cases were heard and determined.

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.

80 I do not propose to make any determination at this stage regarding the accumulated goodwill issue. If a sale occurs it would be unnecessary to do so in any event. If no sale occurs I will re-visit the issue in the context of whether any compensation orders should be made under s 106(5). The initial question will, of course, be whether the applicants are entitled to any compensation for accumulated goodwill, not necessarily because they were unable to achieve a sale but rather because of the position they find themselves in as a result of the respondents' unfair conduct. Whether that should attract compensation for the lost opportunity of achieving a payment for accumulated goodwill remains to be seen.

81 For the reasons I have expressed I intend to grant leave to the applicants 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] NSWIRC 379, and; to incorporate a new Schedule B to the summons in the terms sought by the applicants in their proposed fourth further amended summons. The proposed amendments concerning compensation will be considered in the compensation phase of the hearing. The proposed amendments seeking a section 107 order and the proposed amendments reserving the rights of the applicants to amend the summons to reflect any further findings of the Court, are refused.

82 For the purpose of their submissions, the parties have classified the alternative relief being sought by the applicants as follows: (1) The Notice of Termination Provisions. (2) The Sale Process/Fourth Assurance Provisions. (3) The Buyer of Last Resort Provisions. (4) The Relationship Management Provisions. (5) The Improvement Plan Provisions. (6) The Last Resort Provisions.

I propose to deal with each of these categories of relief in turn.

83 Clause 29 of the main dealership agreement (the Sales and Service Agreement) between the applicants and the first respondent provides, inter alia, that: either party may terminate this agreement, with or without cause, by mailing notice of termination to the other party. In the event either party so mails notice of termination, this agreement shall terminate, subject ... to any written agreement to the parties to a different date, on the 90th day following the day on which such notice is mailed. Such termination shall be deemed a termination by the party which mailed the notice of termination.

84 The other two dealership agreements contain a similar provision and it was this provision upon which the first respondent relied in October 2000 in giving notice of termination to the applicants. As mentioned earlier, however, an agreement was reached between the parties which included an undertaking by the first respondent that the effective termination date to terminate the dealership agreements would be extended to 25 October 2001.

85 By 25 October 2001 the hearing of the applicants' claim for relief was still in its relatively early stages and it became necessary for the Court to make orders to keep the dealership agreements on foot until further order and in the intervening period to prevent the respondents taking any steps inconsistent with or prejudicial to the ongoing operation of the dealership.

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.

666 If the Court were to opt for a longer period of notice it would be appropriate to allow the parties to address this question in the context of the alternative forms of relief that might be available to the applicants. I will address this question later in the judgment.

87 In their claim for alternative relief set out in Schedule B to the proposed fourth further amended summons, the applicants have structured the notice of termination provisions in such a way that the notices which have already been issued by the respondents, and which are presently stayed by order of this Court, are to be regarded as having no force or effect, thus requiring the issuing of new notices. Such new notices require a notice period of five years in order to terminate the dealership agreements if the termination is for reasons other than serious or wilful misconduct. This period of notice is subject to the proviso that, in the event of an irretrievable breakdown in the relationship, the respondents are to have, at the end of the first 15 months of the five year period, the option of permitting the applicants to work out the balance of the 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.

88 The applicants contended that the 90 days' notice of termination provision is unfair on its face and/or has also operated unfairly in the circumstances of this case. As to unfairness on its face the applicants submitted that a period of 90 days was too short and should in fact be five years. In putting this submission the applicants relied on what the Court said about the 90 days' notice period in its primary judgment about being too short in certain circumstances. The applicants also relied on Crawford Fitting Co v Sydney Valve & Fittings Pty Limited (1988) 14 NSWLR 438 and the principles which they submitted could be distilled from that case. The applicant referred to the "Crawford Factors" relevant to the inadequacy of the notice period in respect of the applicants as being such factors as: · The size and nature of the business, including an extensive branch network; revenue ($360 million in 2000); financing arrangements; investment in real estate; staff issues.

· Contractual issues including long term contracts with customers, warranty obligations, contracts with suppliers.

· Future prospect and the contention that it was not a feasible option for the applicants to become, in the short to medium term, a dealer for any of the respondents' competitors within Australia. 89 The applicants referred to a large number of other cases, apart from Crawford Fittings, involving largely commercial agreements and the issue of notice of termination. The applicants submitted that when one considered Crawford Fitting and the other cases to which they referred, the factors relevant to the adequacy of notice are as follows:

· The period of time to deploy labour and equipment from the dealership;

· The period of time to wind up the business in an orderly way;

· The proportion of business represented by the dealership;

· The degree of dependence on the name and goodwill associated with the dealership;

· The development of specialist premises for the dealership;

· The existence of extraordinary expenditure or effort by the dealer;

· The ability to transfer readily skills obtained pursuant to the dealership;

· The obtaining of benefits from the dealership in later years after initial sacrifices;

· The difficulty of obtaining an alternative dealership;

· The practice of the industry concerning the amount of notice;

· The minimum period a reasonable dealer would require for notice for the dealership to be ended;

· The time to re-finance significant funding arrangements;

· The time to terminate arrangements with contractors to the dealer;

· The expectation of the parties on the length of the dealership;

· The period of time to earn income to cover termination costs.

90 The applicants also drew an analogy with employment cases under s 106 and the common law and submitted: [H]ad Gough & Gilmour been senior employees of Caterpillar who had transformed the NSW dealership into the viable and extremely profitable big business that it is today would, on any view, have been entitled to reasonable notice in the range of 1-2 years (or payment in lieu thereof) given their age, seniority, length of service, and their contribution to the success of the Caterpillar business … … [J]ust as in the context of employment law, where a breakdown in the relationship between the parties will not , save in circumstances of serious and wilful misconduct, deny an employee an entitlement to work out a reasonable notice period (see: Rankin v Marine Power International Pty Ltd [2001] VSC 150; Bruce v AWB Ltd (2000) 100 IR 129; North v Television Corporation Ltd (1976) 11 ALR 599), there is no reason in principle why the same result should not apply in the commercial contractual setting now before the Court. That is, there would be no warrant for the Court to set a shorter notice period in this case simply because of the Court's finding that the relationship has broken down or because of its finding that the breakdown was principally caused by the Applicants themselves. That is, the fair and reasonable notice period in this particular case, should be set by reference to the objective factors referred to above with the consequence being that the conduct of the Applicants only being relevant, in this particular context, to the length of the actual notice component of the overall notice period determined as fair by the Court …

91 As to the applicants' contention that the 90 days' termination provision operated unfairly, it was submitted that the Court would reject the respondents' contentions that the applicants were in fact treated fairly at the point of termination because the 90 days' notice was extended to 12 months' notice and because the applicants have now had "effective notice" in excess of two years. It was submitted that there never was a fair and proper basis for the issue of a notice of termination in October 2000 and that the notice that did issue was fundamentally tainted with unfairness such that the Court would not regard it as proper or "effective" notice at all.

92 The applicants strongly resisted the respondents' contention that the Court should take into account the time both before (from 8 June 1999 when the applicants were requested to sell) and after the issue of the notice of termination in October 2000 when considering whether the notice period should be further extended.

93 The applicants further submitted that in determining a fair and reasonable notice period the Court should not take into account the possibility of a sale of the dealership but rather should confine itself to a consideration of the objective facts. The applicants submitted: [T]he prospect or possibility that … the dealer may be able to sell the business soon is not an established fact but at worst a dangerous prediction or guess about what will or might happen in the immediate future, that could not provide a proper foundation for altering any conclusion as to a proper notice period that otherwise arises from a consideration of the above objective facts/considerations.

94 The applicants submitted that the evidence did not support the likelihood of a sale in the very near future. However, even if the Court concluded that it was appropriate to take into account the prospect of a sale in the near future in determining a fair and reasonable notice period, there was no evidentiary foundation for discounting to any significant degree the length of the notice period that the Court otherwise believed to be appropriate.

95 It was further submitted that if the Court was prepared to regard the prospect of a sale as relevant to the fixation of a proper notice period then a secondary question would arise, namely, what period of time should then be allowed for the contemplated sale process to take place. In this respect, the applicants submitted the Court would have to make an allowance of 30 weeks.

96 The respondents' position in relation to notice of termination was that: (1) The 90 day notice period currently provided for by the agreements is not unfair in the circumstances of this case and there is no need for an extended period; (2) Alternatively, if the Court were minded to extend the notice period of 90 days, that extension should only be for a further 90 day period; (3) The notice periods contemplated by the clauses are excessive; (4) It is inappropriate for the agreement to be burdened by the insertion of the clauses in question.

97 The respondents' position was said to be founded upon the principle that an appropriate notice period is to be determined by reference to the purpose that underlies the need for such a period of notice to be given. Further, it was submitted, any alternative relief sought by the applicants in respect of notice: (1) must be consistent with the Court's decision to refuse the primary relief and the reasons for that refusal; (2) must not involve any rewriting, reformulation or modification of the primary relief or seek to obtain any form of "alternative relief" that in substance would confer upon the applicants benefits akin to the primary relief; (3) must be limited to the question of what, in all the relevant circumstances, is a reasonable notice of termination (as per the principles in Crawford Fitting Co v. Sydney Valve & Fitting Pty Ltd); (4) must be a proper, fair and reasonable remedy for the actual unfairness found in the primary judgment in relation to the decision to issue the notice of termination after September 2000.

98 After detailed reference to the Court's decision to refuse the primary relief and the Court's findings of fact, the respondents addressed each of the four parts of its position regarding notice. As to the submission that the 90 days' notice period was not unfair and that, accordingly, no further notice period is required, the respondents said that this proposition involved a consideration of two interrelated issues: (1) The first is the determination of whether there has been a fair notice period in the circumstances of this case, using the principles in Crawford Fitting as a guideline; (2) The second is the consideration of whether that notice has, for any reason, been suspended or otherwise ceased to operate at any material time.

99 The respondents submitted that the key Crawford Fitting factors that are to be taken into account in determining whether a given notice period is reasonable in the circumstances were as follows: (1) Opportunity to enter into alternative arrangements (per McHugh JA at 444); (2) Time to wind up matters arising out of the distributorship (per McHugh JA at 448);

(3) Time to carry out existing commitments (per McHugh JA at 448);

(4) Time to bring current negotiations to fruition (per McHugh JA at 444);

(5) Time to recoup extraordinary expenditure or loss (per McHugh JA at 444);

(6) The duration of the relationship and extent to which parties had conducted affairs and incurred expenditure on the basis of an anticipated long term relationship (per McHugh JA at 451 and per Clarke JA (dissenting) at 458);

(7) A shorter period of notice is preferred (per Priestley JA at 440 and at 457 per Clarke JA).

100 Factors that were said to have been identified in Crawford Fitting as being excluded from the assessment of the reasonableness of the notice period were as follows: (1) Fact that termination itself may be "unfair" (per Priestley JA at 440); (2) Recurrent expenditure or effort not being of an extraordinary nature (per McHugh JA at 448); (3) Time to allow recipient of notice to maximise their profits and act in their own self-interest (per McHugh JA at 450); (4) Time to enable the recipient of the notice to earn further income (per McHugh JA at 451); (5) Time to allow the recipient of the notice to do as well in new business (per McHugh JA at 453); (6) Time to allow recipient of notice to minimise every risk or loss they may suffer on termination of the agreement (per McHugh JA at 453).

101 The respondents submitted that each of the Crawford Fitting factors to be taken into account in determining whether 90 days' notice was reasonable in the circumstances had been satisfied in the present case and there was no warrant for substituting a greater period of notice or "inserting the convoluted contractual provisions contended for by the applicants."

102 The respondents further submitted that: On any view, the Applicants have known since June 1999 that there was no longer any prospect of them retaining the dealership. That is, an " informal notice " period of some 16 months preceded their receipt of " formal notice " in October 2000. Thereafter, they had a formal notice period of some 15 months, followed by a further period, to this date, by reason of the injunction granted by the Court. In total, the entire notice period has already amounted to some 45 months.

103 As to the applicants' submissions that in considering the question of reasonable notice the Court should not count the period from October 2000 onward, the respondents submitted this was "largely academic". The respondents submitted: What is of greatest significance is that, if 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.

104 In this respect the respondents relied on Anchor Butter Co Ltd v Tui Foods Ltd [1997] 3 NZLR 107; 38 IPR 250. As the respondents explained, in that case the plaintiff, as the registered proprietor of certain trade marks, gave to the defendants 12 months' notice of termination of registered user agreements on 4 May 1993. The defendants ignored the notice and the plaintiff then issued legal proceedings. The defendants asserted that the registered user agreements were not terminable by the giving of reasonable notice and that they were perpetual in duration. The defendants were unsuccessful and in relation to the question of whether the notice had been effective since 4 May 1993, the Court said the following (38 IPR at 283): I deal first with the question of whether the notice has been effective since it was given on 4 May 1993. Mr Paine did not submit any authority in support of the submission that the notice had been ineffective for any period since 4 May 1993. The plaintiff made its position quite plain as early as its letter of 2 February 1993. In that letter it asserted that the user agreements were terminable on reasonable notice. The letter of 4 May 1993 was unequivocal in its terms. It gave the defendants 12 months' notice of termination. The receipt of that letter is admitted in the defendants' statement of defence although of course at the time, the contents were ignored and that situation continued down until the time of trial. The defendants admit that they have used the Fernleaf mark since the expiration of the 12 months' notice on 5 May 1994. They have therefore deliberately chosen to take the risk of an adverse finding that the user agreements were not terminable on reasonable notice.

105 The principles set out in Crawford Fitting were applied by the Court in Anchor Butter, with the result that the reasonable period of notice determined by the Court ran from the date upon which the original notice of termination was given (4 May 1993), not from the date on which judgment was delivered (7 March 1997).

106 The respondents submitted: Like the defendants in Anchor Butter, the Applicants in the present case deliberately and voluntarily chose to take the risk of the Primary Relief being refused. That risk eventuated, the Court having emphasised in Interlocutory Judgment No. 13 that "the Court is not prepared to countenance any alternative form of relief that keeps the dealership agreements on foot for a period of time that unfairly frustrates and delays the Respondents' right to end its relationship with the Applicants and to appoint a new dealer for the New South Wales and ACT Territory". The central aspect of the Primary Relief sought by the Applicants, namely, the continuation of the dealership ad infinitum , has been comprehensively foreclosed by the Primary Judgment, as reinforced by the Court's observations in Interlocutory Judgment No 13. Accordingly, as was the case in Anchor Butter, it is not open to the Applicants to contend that the running of the notice period was suspended between October 2000 and the date of judgment in this proceeding.

107 The second part of the respondents' position regarding the notice period was that, in the alternative, if the Court were minded to extend the notice period of 90 days, that extension should only be for a further 90 days' period. The respondents contended that the considerations that warranted the Court refusing to countenance a further notice period any greater than 90 days included: (1) the Court's findings that it was the applicants' conduct which gave rise, in the first place, to the need for the relationship to come to an end; (2) the Court's findings concerning the applicants' culpable conduct throughout the sale process from January 2000 onwards; (3) the limited time it took to consummate a deal between Bond Corporation and the applicants at the time of acquisition in 1988 (where Bond took an entirely different approach to that of the applicants now); (4) the evidence from Bryant that due diligence should ordinarily be able to be completed in about three months; (5) the time which has already elapsed since June 1999, and the extensive sale process period during which the parties have already had the opportunity to engage in negotiations, due diligence and other pre-sale activities; (6) Coonan's evidence regarding the three month period given in connection with the acquisition of Waugh & Josephson in 1989; (7) the fact that the result able to be achieved through the sale/exit process was, in dollar and return terms, an excellent result for the applicants and the only reason it has not been achieved in actuality is the applicants' conscious and strategic election not to pursue it; (8) the time that has elapsed; (9) the matters raised in relation to the Crawford Fitting principles referred to above; (10) the length of time which the respondents have been constrained from operating their business in accordance with their rights.

108 The third part of the respondents' position regarding the period of notice was that the notice periods sought by the applicants in their Schedule B were excessive. It was submitted that the applicants' proposed "relief" was grossly disproportionate to the unfairness that has been found to exist and was in no sense remedial. It involved a continuation of the dealership for an inordinately long period, and was directly contrary to one of the factors identified by Crawford Fitting as being a matter which must be excluded from the ascertainment of what is a reasonable period of notice, namely the opportunity to make future profits.

109 It was also submitted that the period of notice sought by the applicants ignored the finding in the primary judgment at par [796(3)] that "it is unrealistic to the extent of being fanciful to expect that a proper working relationship based on cooperation, trust, confidence and respect for one another could be established and maintained between the applicants and the respondents" and the finding in interlocutory judgment No. 13 at par [36] that "it would be entirely inconsistent with [the refusal of primary relief] to put in place an exit regime that overlooked the fact that the relationship between the applicants and the respondents has broken down irretrievably".

110 The fourth part of the respondents' position regarding the period of notice was that it would be inappropriate to burden the dealership agreements with the notice provisions proposed in Schedule B. It was submitted that the proposed clauses were convoluted and unworkable and were of a kind wholly inappropriate for inclusion in a relational contract. The respondents contended the provisions were "ambiguous, uncertain, commercially unrealistic and will inevitably lead to further disputes". 111 In their submissions on notice the respondents also addressed what they considered to be the flaws in the applicants' case.

112 There is obviously a very significant difference between the parties as to what should constitute a fair period of notice to terminate the dealership agreements. On the one hand, the respondents contended that the period of 90 days is fair and reasonable or, in the alternative, if the Court were minded to extend the notice period, that extension should only be for a further 90 days. Any extension would be implemented through the notices of termination already issued and not by a variation to the dealership agreements. 113 On the other hand, the applicants submitted that 90 days' notice was unfair and that the period of notice should be five years with the option that after the first 15 months of the notice period, the respondents could terminate the relationship and pay the applicants a sum to represent "the anticipated profits Gough & Gilmour would have earned during the balance of the notice period."

114 Both parties agreed - to differing degrees - that the principles enunciated in the Court of Appeal's judgment in Crawford Fitting are relevant to determining a fair period of notice in this case. In its primary judgment, this Court referred to Crawford Fitting and at pars [750] to [751] said: 750 Whilst the factual position in Crawford Fitting v Sydney Valve concerned an implied term of reasonable notice rather than a specified or agreed period of notice, I agree with the applicants that the decision, nevertheless, is relevant in outlining the considerations that are pertinent to determining whether (a) a period of 90 days' notice in the dealership agreements is unfair; and (b) (if a conclusion of unfairness is reached) whether the periods outlined in the Third Further Amended Summons should be inserted into the dealership agreements. Those considerations include the period to deploy labour and equipment in alternative employment, to carry out commitments, to complete negotiations to wind up the association in a business like manner, as well as the period to recoup any extraordinary expenditure or effort made at the commencement of, or during, the relationship.

751 What must also be considered, however, is the submission by the respondents that: (a) By agreement with the applicants, the notice of termination was extended to be for a period of 12 months from 25 October 2000, and that, therefore, the "chief purpose of a notice for a reasonable period" as set out in Crawford Fitting was more than amply satisfied; (b) The applicants have had and still have the opportunity of achieving a complete recoupment of extraordinary expenditure (if they have not already completely recouped it from the vast profits to date) through a sale of assets to ACE [the holding company of the Stokes' organisation] on the terms offered and refreshed by way of further offer in more recent times.

115 The Crawford Fitting principles are not, however, the sole consideration here in determining what is a fair period of notice to terminate the dealership agreements; Crawford Fitting was not decided on the basis of what is necessary to address any unfairness which, of course, is the test that this Court has to apply. The principles in Crawford Fitting will certainly assist in determining what is fair by providing certain objective standards, but it still remains to be determined by this Court as to what is necessary to address unfairness in the circumstances of this case.

116 In Crawford Fitting Priestley JA said at 440: [On] first acquaintance with the facts of the case[I felt] that there was, somehow, something unfair in the way the distributors had been treated by the appellants. On trying to pinpoint the reason for this reaction, I concluded that it stemmed from the fact that the contracts were terminated, rather than that the length of notice of termination was unreasonable. It was only the latter point that was in issue in this court.

117 As I have said, the Court of Appeal in Crawford Fitting was not concerned with fairness, whereas in these proceedings the unfairness of the contract or arrangement is the cornerstone of any consideration by the Court.

118 I also note that there were a number of features of the Crawford Fitting case that distinguish it from the present proceedings. For example, there was no express clause giving a right to either party to terminate the agreement. Further, the factual circumstances in Crawford Fitting were quite different to those that prevail here. As the applicants submitted, Crawford Fitting "does not and cannot constitute a code of relevant factors to be taken into account in breach of contract cases let alone in the section 106 statutory context."

119 Other important considerations, in addition to the Crawford Fitting factors, are: whether and, if so, to what extent the Court should have regard to what has occurred since 8 June 1999 and whether any part of that period should be taken into account in determining the notice period; and, importantly, whether the prospect of a sale to a third party should be taken into account in determining what would be a reasonable period of notice to overcome the unfairness in this case.

120 On 8 June 1999 the managing director of the first respondent, Mr Chris Curfman, advised the second applicant the relationship between the parties was over and that the second applicant should sell his shares in the business.

121 At par [483] of the primary judgment the Court stated: 483 I consider that [on 8 June 1999] Mr Curfman adhered carefully to his instructions from Mr Owens; that he (Curfman) was not authorised to terminate the dealership agreements but that he made it clear that the "relationship is over" and there was no going back. It could not be said by any stretch of the imagination there was any implication in what Mr Curfman said on 8 June 1999 that, provided the applicants negotiated in good faith and behaved reasonably in the sale process, if a sale nevertheless did not result, then they would not ultimately face cancellation of the dealership agreements.

122 The applicants were clearly on notice as from 8 June 1999 that the relationship with the respondents was over and it was only a question of time, to be governed largely by the sale process, as to when the dealership would no longer be theirs. It was Curfman's view at the time, that a sale could be concluded by 31 December 1999. Thus, in the context of: a contractual right to terminate the dealership on 90 days' notice; an assurance by the respondents that the sale process would be conducted on an amicable and reasonable basis without duress and the respondents would assist the applicants to receive a fair value for the shares; and, a policy that cancellation of a dealership would only occur as a last resort, Curfman's view would indicate that even on the most optimistic scenario (that is, with the assistance of the respondents a sale would occur) at least six months was required to allow the dealership to change hands.

123 In the result, six months did not prove to be an adequate period in which to achieve a sale of the dealership. And while they harboured concerns about what they regarded as delaying tactics on the part of the applicants designed to either frustrate the sale or increase the purchase price, the respondents allowed the sale process to continue until October 2000, some 16 months from the time the respondents first informed the applicants that the relationship was over.

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.

125 The negotiations between the applicants and the Stokes' organisation had reached a point in September 2000 where differences between them had narrowed considerably. Indeed, following advice from the Stokes' organisation on 28 September 2000 that it had "no alternative but to confirm that we consider the negotiations for the purchase of your company are at an end", Mr Gough advised the first respondent in a letter the following day: We are confident that we have been negotiating in good faith and that our position is reasonable. Over the course of negotiations we would have developed a better understanding of WesTrac's issues and may well have been prepared to move further. Unfortunately this opportunity had not been afforded to us.

We still believe that were WesTrac to negotiate in good faith and reasonably with us, completion of the sale of the business could occur by 31 October 2000.

Our preference continues to be to remain as Caterpillar dealer. Should this not be possible, we would also be prepared to negotiate in good faith a sale on reasonable terms to an alternative dealer nominated by Caterpillar. We do feel that such negotiations would stand a better chance of achieving a successful and fair outcome if more than one potential purchaser was nominated.

126 Hence, it was Mr Gough's view at the time that if Westrac were to negotiate in good faith, the sale of the dealership would have been completed in a further one month's time. In relating what Mr Gough had to say in his letter of 29 September 2000 I do not accept the implicit criticism in Mr Gough's comments regarding the Stokes' organisation that it had not negotiated in good faith. Whilst the findings in the primary judgment regarding the conduct of the Stokes' organisation point to that organisation underhandedly using its relationship with the respondents to bring pressure to bear on the applicants to sell at the price offered by Stokes, the findings are not to the effect that up to the meeting on the cruise ship in September 2000 the Stokes' organisation was negotiating in bad faith. In fact, up to the point where the Stokes' organisation had misled the respondents into believing that the applicants had reneged on a commercial agreement made on 15 August 2000 and the subsequent meeting on the cruise ship, that organisation had conducted itself in a commercially proper and businesslike manner. It may well have been the case, therefore, if the respondents had given the applicants the time they sought, on the understanding that if the sale was not completed in that time termination notices would issue, that the sale would have gone through.

127 Whilst this might be hypothesis, I consider that it is a relevant consideration as to what might constitute an element of the relief in this case. The state of the evidence is that Westrac remains the respondents' preferred dealer candidate for the dealership, although I do not know whether Westrac is still in a position to proceed with the purchase of the applicants' interests or is in a position to make a genuine and realistic offer. However, my clear impression from the evidence is that in so far as the respondents are concerned, a sale to Westrac remains a live option and I have not been advised otherwise on this important issue. I am uncertain as to whether a sale to Westrac is a live option for the second and third applicants but given the inevitability of termination, fairness dictates that they should be given the opportunity to re-visit with Westrac the prospects for a sale of their shares. Accordingly, I consider that a period of time ("the additional sale period") should be allowed for the second and third applicants to explore that option and, if it is open to them, to attempt to negotiate a sale of their shares with Westrac, or some other dealer candidate nominated by the respondents, before the notice period in any notice of termination commences to run.

128 In coming to this view I have considered the respondents' submissions that allowing further time would not only be futile but also unfair to the respondents. This is said to arise out of: 1. The applicants claim the parties are "poles apart" as to price; 2. The Court's findings in the primary judgment that "the applicants never approached the sale in a cooperative and constructive manner"; 3. Statements by the applicants that they may not sell their interests in the dealership business and may decide to redeploy "their resources generally into one or other 'BATNA' options".

129 The respondents contended that given these facts it was most unlikely that the applicants would take the renewed opportunity to sell seriously and the Court would only be providing the applicants with more time to prevaricate to the disadvantage of the respondents. The respondents also submitted that to allow the applicants more time to sell would be inconsistent with the Court's findings in the primary judgment at par [796(3)] that: 3. To maintain the dealership would involve keeping the parties together in a relationship that requires respect, cooperation, trust and confidence. Those elements did not exist at the time of the respondents' decision to cancel the dealership. These proceedings have involved strong attacks on the credit and character of senior executives of both the applicants and the respondents. It is unrealistic to the extent of being fanciful to expect that a proper working relationship based on cooperation, trust, confidence and respect for one another could be established and maintained between the applicants and the respondents. and inconsistent with what the Court said in interlocutory judgment No 13 at par [36] that: The primary relief sought by the applicants has been refused and subject to a determination as to alternative relief, the Court does not intend to block the respondents' right to terminate the dealership beyond a period that is reasonable. Further, given the decision to refuse primary relief and the reasons underpinning that decision, it would be entirely inconsistent with that refusal to put in place an exit regime that overlooked the fact that the relationship between the applicants and respondents has broken down irretrievably.

130 As to the relationship issue, the respondents are correct to refer to what I have already said about it. The Court is well past the point of considering whether the relationship can be mended and the parties brought back together for the longer term; the Court has decided - emphatically - that is not only undesirable but also not practicable. Whilst the applicants contend that the relationship is not in such a poor state that it could not be maintained for another five years, I do not agree. There are two sides in this relationship and it is brutally apparent that the respondents no longer wish to have the applicants as dealers for all the reasons I canvassed in the primary judgment. As I said in that judgment, to maintain the dealership would involve keeping the parties together in a relationship that requires respect, co-operation, trust and confidence. It is unrealistic to the extent of being fanciful to expect that a proper working relationship based on co-operation, trust, confidence and respect for one another could be established and maintained between the applicants and the respondents [par 796(3)]. 131 Notwithstanding the unfairness visited on the applicants by the respondents, I do not intend to require the respondents to maintain the commercial relationship with the applicants for any longer than it is necessary to deal with the unfairness because such unfairness is outweighed by the culpable conduct of the applicants.

132 As to the respondents' submissions regarding what the applicants might do with any further time to sell, that is a matter, together with other relevant matters, that might be taken into account in the context of considering any money orders under s 106(5) of the Act in connection with the variation of the overall arrangement in respect of the additional sale period. If the applicants simply use the time to stall, that would be a matter to count against them. In the event the second and third applicants decide that they do not wish to sell their shares - which is not a matter that would necessarily count against them - that decision will be conveyed to the first respondent within 30 days of the date of this judgment and the additional sale period will terminate on the day after the date that the second and third applicants advise the first respondent they do not wish to sell ("the additional sale period termination date"). The period of notice of termination that I intend to provide for will commence to run from a date seven days after the additional sale period termination date.

133 The applicants contended that if the Court was to provide a limited additional period in which to allow a sale to proceed, they would find themselves in a weak bargaining position vis a vis Westrac because Westrac could simply hold out for a lower than reasonable price until the additional period expired. That is possible. However, firstly in addition to the additional period to sell I intend to provide a further period in relation to the notice period for termination during which time sale negotiations could continue. Secondly, if in the circumstances Westrac sought to take advantage of the applicants' position by driving an objectively unreasonable hard bargain as to price, in considering any money orders the Court could have regard to such matters as the respondents' culpable contribution to placing the applicants in the position in which they found themselves.

134 The question then becomes what might be a fair period of time to re-visit the prospects for a sale and to engage in meaningful negotiations. As I earlier observed, it was Mr Gough's view in September 2000 that a further month would be sufficient to achieve a sale. I expect that given the passage of time since September 2000 more than one month would now be required, even if only for the purpose of reviewing financial considerations, updating due diligence requirements and for the parties to re-assess their bargaining positions. I consider that a period of 90 days should be allowed. I do not consider that it would be necessary to provide for a longer period. The applicants have been aware since December 2002 that, as they had not been successful in their primary relief, a future sale was a distinct possibility and, in my opinion, the applicants should have made some preparation for that possibility.

135 Any notice of termination period would not commence to run until a date which is 90 days after the date of this judgment. In the event that a sale occurs prior to the expiration of the 90 days' period, the applicants will advise the respondents to this effect and any notice period will commence to run from a date seven days after the date of sale or a binding agreement to sell, whichever is the earlier.

136 As I have already observed, the conduct of the parties in relation to the extended opportunity to achieve a sale of the applicants' interests may be a relevant consideration in relation to the question of compensation under s 106(5) of the Act.

137 This brings me to the question of what is a fair and reasonable notice period and raises for consideration the principles laid down in Crawford Fitting and other cases. It also requires a consideration of whether the period from 8 June 1999 should be taken into account in determining what is a fair and reasonable notice period.

138 In Crawford Fitting, McHugh JA made the following observations at 444 as to the relevant principles to apply in order to determine a reasonable notice of period:

When a contract is terminable on reasonable notice, the period of notice must be sufficiently long to enable the recipient to deploy his labour and equipment in alternative employment, to carry out his commitments, to bring current negotiations to fruition and to wind up the association in a businesslike manner.

If, during the contract, a party, acting within the scope of the agreement, engages in extraordinary expenditure or effort, that factor must be taken into account in determining the reasonableness of any notice given. The weight to be given to the factor will vary from case to case and the particular circumstances. ... On the other hand, recurrent expenditure or effort not being of an extraordinary nature would not seem relevant to the reasonableness of the notice period. The expenditure of money or effort is simply part of the ordinary cost of doing business. Once the business has existed for a reasonable period, the inability to profit from such work or expenditure is part of the business risk that the agent or distributor takes in entering into an agreement which is terminable at any time. Further, the prospect of obtaining profits in the future is not a relevant factor to be taken into account except so far as it is consequential upon the incurring of extraordinary expenditure or effort within the scope of the agreement. 140 McHugh JA (with whom Priestley JA agreed) also made the following observations at 448 as to the purpose of a notice for a reasonable period:

The chief purpose of a notice for a reasonable period, therefore, is to enable the parties to bring to an end in an orderly way a relationship which, ex hypothesi , has existed for a reasonable period so that they will have a reasonable opportunity to enter into alternative arrangements and to wind up matters which arise out of their relationship. Matters to be wound up will include carrying out existing commitments, bringing current negotiations to fruition, and, where appropriate, obtaining the fruits of any extraordinary expenditure effort carried out within the scope of the agreement. The line between ordinary recurrent expenditure and effort and extraordinary expenditure and effort will not always be easy to draw. But in general it will be determined by what the parties would reasonably have contemplated was extraordinary effort or expenditure.

141 At 440 Priestley JA observed: Each party to the contract would have conflicts of interest during the notice period which were not present before the notice was given. In each situation it seems that the shorter the notice period, within the limits of reasonableness, the better.

The difficult relationship during the period prior to the termination of the contract, with possible adverse effects upon the business interests of the appellant, is a factor to which regard should be paid in determining what was a reasonable notice period in the circumstances.

143 The factors identified in Crawford Fitting applicable to the question of whether a notice period is reasonable may be stated as follows: the period of notice must be sufficiently long to enable the recipient of the notice to: (1) Have a reasonable opportunity to enter into alternative arrangements. (2) Carry out existing commitments.

(4) Recoup extraordinary expenditure or loss where appropriate.

144 Additionally, subject to the particular features of this case, the duration of the relationship and extent to which parties had conducted their affairs and incurred expenditure on the basis of an anticipated long term relationship should be taken into account. And finally, the shorter the notice period, within the limits of reasonableness, the better.

145 As to these factors, the respondents contended that all of them had been satisfied. For instance, in relation to the first factor the respondents submitted that the applicants had been aware since June 1999 that the relationship was over, that the sale process with Westrac had provided the applicants with the opportunity to enter into the necessary alternative arrangements and that in fact the evidence was that the applicants had explored, considered and discussed alternative arrangements with their financiers over an extended period.

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.

The relevant principle was made clear in Anchor Butter Co Ltd v Tui Foods Ltd [1997] 3 NZLR 107 ((1997) 38 IPR 250) … … Like the defendants in Anchor Butter, the Applicants in the present case deliberately and voluntarily chose to take the risk of the Primary Relief being refused. That risk eventuated, the Court having emphasised in Interlocutory Judgment No. 13 that "the Court is not prepared to countenance any alternative form of relief that keeps the dealership agreements on foot for a period of time that unfairly frustrates and delays the respondents' right to end its relationship with the applicants and to appoint a new dealer for the New South Wales and ACT Territory". The central aspect of the Primary Relief sought by the Applicants, namely, the continuation of the dealership ad infinitum , has been comprehensively foreclosed by the Primary Judgment, as reinforced by the Court's observations in Interlocutory Judgment No 13. Accordingly, as was the case in Anchor Butter, it is not open to the Applicants to contend that the running of the notice period was suspended between October 2000 and the date of judgment in this proceeding.

147 For their part, the applicants submitted that there was no basis for contending that the Crawford Fitting factors had been satisfied. Firstly, in relation to the period from June to December 1999 - that is the period between when the applicants were informed that the relationship was over and when Westrac initially withdrew from the negotiations - no actual notice of termination had thus far been issued. Secondly, although the applicants were aware the relationship was over, their expectation was that the respondents would present a preferred dealer candidate with whom to negotiate a sale and their energies and attention were directed accordingly. The applicants submitted: [I]t could not be reasonably suggested that the Applicants during that six month period should have spent their time seeking to wind up their business or at least wind it down. Such behaviour, whilst consistent with the Crawford principles, would be entirely inconsistent with a desire to maximize the price in the sale negotiations. Accordingly, assuming available time and capacity (beyond running the business and negotiating with the Stokes organisation) the only aspect of the Crawford principles that the Applicant could have been expected to attend to during that period would be to commence thinking and/or planning and/or investigating what other business opportunities might be available to the Applicants in the event that the business was not sold. However, it is also immediately apparent that in the prevailing circumstances it could not be reasonably expected that the Applicants would have made much progress in that regard (i.e. by way of exploring options on a contingency basis).

148 In relation to the period between February 2000, when negotiations between the Stokes' organisation and the applicants re-commenced, and October 2000, when the respondents served the 90 days' termination notices on the applicants, the applicants submitted: In the absence of any relevant advice from Caterpillar … and in the absence of any warning (and certainly in the absence of the receipt of any formal notice of termination), the Applicants continued with the sale process without cause to believe that they were at real risk of cancellation, let alone real risk of cancellation by the end of October 2000… In such circumstances, it would be unreasonable to expect that the Applicants should have moved forward and focused on compliance with the Crawford principles i.e. behaved as if a formal notice of termination had already issued (albeit without any termination date specified therein). … The consequence of the above unconscionable conduct on the part of the Respondents starting from as early as May 2000 (if not earlier) was that the Applicants were served with a 90 day notice of cancellation (that was, in any event, totally defective for other reasons) without having any advance warning or notice that this was going to take place. In such circumstances, it is inconceivable to contend that 90 days notice was fair and reasonable at the very least because it is inconceivable to believe that the Applicants could readjust in accordance with the Crawford principles during any such period. It is also unreasonable for the Respondents to suggest that the time taken in the sale process should be treated as Crawford time.

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.

150 This is not a case that is on all fours with Anchor Butter. In this case, although the applicants did not succeed in relation to their claims for tenure, they were successful in relation to their claim that the circumstances surrounding the termination of the dealership agreements were unfair notwithstanding that the respondents strongly resisted any such claim of unfairness. So it cannot be said there was no validity in the applicants' claims or that the claims were hopeless from the outset. Further, for the period June 1999 to September/October 2000 the applicants were engaged in the process of selling their interests in the dealership to Westrac so it could not be said during that period the applicants were guilty of ignoring the prospect of losing any litigation like the defendants in Anchor Butter because there was no litigation on foot during that period. 151 However, the primary claim by the applicants involved keeping the dealership and, in my opinion, there was always the prospect that such a claim might not be successful. That possibility created an obligation on the applicants, after October 2000 when they were served with termination notices and commenced proceedings under s 106, to consider the alternatives in the event they were not successful in keeping the dealership. It would be plainly unreasonable for the applicants to have sat on their hands for over two years without taking any steps to consider alternative arrangements in the event they did not succeed in retaining the dealership and at the end of that period, having lost their case, contend that they needed another five years to satisfy the Crawford Fitting factors.

152 As for the respondents' contention that the applicants should have engaged in "without prejudice" sale negotiations whilst the litigation was proceeding, such a contention is quite unrealistic considering that the applicants' claim in the litigation was that they were entitled to keep the dealership. As the applicants rightly pointed out, what sane businessperson would participate in expensive, time consuming negotiations with a potential seller who was involved in pursuing legitimate claims to keep the business rather than have to sell it.

153 The evidence indicates, in any event, that in fact the applicants did at least explore alternative arrangements during the notice period in the event they were unsuccessful in their claims to keep the dealership. First, there was the so-called 'BATNA' ("Best Alternative To Negotiated Agreement") option. The BATNA option was explained in a question put by Mr Houghton QC (for the respondents) to Mr Millen (financial adviser to the applicants) as follows: Q: The BATNA … was that a concept that was as follows: if Mr Gough and his partner, Mr Gilmour, were unable to sell the business because, for instance, they were not happy to accept the price that was being offered, and if Caterpillar in the future exercised its right to terminate the dealership, then BATNA was an alternative business whereby Gough & Gilmour could utilise the assets and infrastructure that it had established over the years to sell used Caterpillar [equipment] rather than new Caterpillar equipment and rental business.

154 The BATNA option had been considered by Messrs Gough & Gilmour by September 1999, although I note Mr Gilmour was not enthusiastic about the viability of the option.

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.

157 A further report of ABN Amro dated 18 February 2002 stated: "We have assessed below several scenarios… Best case scenario is that G&G continues 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 can operate the business on a reduced basis. Under a worst case scenario (ie G&G lose the CAT Dealership franchise), the business could continue to trade due to: - The opportunity to become an AgCo dealer which will generate significant revenues in regional areas; - A strong parts and service business which has built up significant goodwill over the years; - Potential to grow the used equipment business. 1H02 revenues in used equipment were AUD30 min compared to a full FY01 result of AUD24min. G&G expect to achieved AUF50 min in used equipment revenues in FY02. Unlike new equipment, used sales are not restricted to regions so G&G could expand nationally or globally if required (If G&G retain CAT franchise they would not take this course of action as it would encroach on other CAT dealers territories). Under a 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…

158 It may be seen that the applicants had actively considered the alternatives available to them in the event they did not retain the dealership.

159 In considering the Crawford Fitting factors, I must have regard to how those factors should be applied to the particular circumstances of this case. In this respect, the applicants genuinely desired to maintain the dealership and considered that they had not conducted themselves in such a way that termination was justified. In order to keep the dealership the applicants embarked on a course of litigation under s 106 of the Act. As I have said, it would have been unreasonable and unrealistic to have expected the applicants to have continued "without prejudice" negotiations with the Stokes' organisation whilst the litigation was proceeding. However, it is not unreasonable to expect that since October 2000 the applicants would have considered the prospect of being unsuccessful in their litigation and would have undertaken some preliminary planning in respect of alternative arrangements if they were to lose. With that observation in mind, the question is, in the circumstances of this case, what is a reasonable and fair period of notice that would satisfy the Crawford Fitting factors and address the unfairness perpetrated on the applicants?

160 That question has to be addressed against the background of the Court having afforded the applicants an additional period of 90 days to effect a sale if that is the course they choose. In other words, before any notice period commences to run the applicants may choose to sell their interests to a dealer nominated by the respondents or they could decide not to sell and to deploy their capital and labour in another business. By choosing the sale option, however, the applicants would have chosen one of the alternative arrangements countenanced in Crawford Fitting that was open to them in the face of an inevitable termination of the dealership. Thus, the question may be re-phrased as follows: what is a fair and reasonable period of notice having regard to the Crawford Fitting factors, to the unfairness and to the fact that the applicants have been afforded the opportunity of an additional 90 days to sell? 161 A sale of the applicants' assets (including premises), the transfer of debt to the new dealer and the assignment to the new dealer of the applicants' obligations in respect of FOCUS contracts, rental contracts, supply contracts, buy back contracts, warranties and employees would reduce significantly the time needed to satisfy the Crawford Fitting factors compared to a situation where no sale had occurred. A sale would almost certainly ensure that the applicants would recoup any extraordinary expenditure or effort if it had not already been recouped which, I have found was, indeed, the case. In this respect, in the primary judgment 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 …

162 In the event of a sale, it does not seem to me that the applicants would require an extensive period of notice in order to satisfy the Crawford Fitting factors. Indeed, I cannot see how it would be necessary to provide for more than 90 days' notice of termination to allow the applicants to wind up their remaining affairs.

163 In the event there was no sale, I consider that the notice period would need to be longer than 90 days. The factors that I consider relevant in determining what the notice period should be in the event no sale occurs, or a partial sale takes place in order for the applicants to retain some of their assets so that they might enter into alternative arrangements, are as follows: (1) The need to ensure that any notice period is consistent with the findings in the primary judgment, particularly those relating to the question of unfairness and the reasons for refusing the primary relief. (2) The need to provide a reasonable opportunity for the applicants to enter into alternative arrangements. (3) The need to allow time for the parties to carry out existing commitments.

(4) The need to allow time for the applicants to bring current negotiations with customers and suppliers to fruition.

(5) The need to allow time for the applicants to recoup extraordinary expenditure or loss where appropriate.

164 Before addressing each of these factors, it is to be noted that what period of notice is reasonable is essentially a matter of judgment: 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) at 23. In Stenhouse Australia Ltd v Phillips [1974] AC 391 at 402 Lord Wilberforce observed: An opinion as to … reasonableness …, particularly of the time during which [the matter in question] has to run, can seldom be precise, and can only be formed on a broad and common sense view [after the Court has informed itself as fully as it can of the facts and circumstances].

165 In Decro Wall International SA v Practitioners in Marketing Ltd [1971] 1 WLR 361 Buckley LJ said at 381: [W]hat is reasonable notice for the termination of any contract is largely a matter of personal opinion. The question must be answered in the light of all the relevant surrounding circumstances. Also see Port Macquarie Golf Club Ltd v Stead (1996) 64 IR 53 at 68.

166 As to the first factor, namely, the need to ensure that any notice period is consistent with the findings in the primary judgment, in that judgment it was found that upon entering the dealership agreements the second and third applicants had an expectation that the agreements were long term, secure arrangements (par [786(2)]). The respondents held a similar view, although it is clear that all of the parties to the dealership agreement were aware of the provision allowing the first respondent to terminate the agreements on 90 days' notice. That provision, however, would only be invoked as a last resort after the respondents had taken all reasonable steps to avoid cancellation of a dealership (par [789]).

167 The respondents decided in 1999 that they no longer wanted the applicants as dealers. That decision was based on what the respondents regarded as the unacceptable attitude and conduct of the applicants in respect of their relationship with the respondents (see par [786]). Before putting in train the machinery to end the relationship the first respondent failed to advise the applicants of its intention to recommend to the second applicant that the relationship be brought to an end and failed to properly consider an improvement plan to allow the applicants an opportunity to rehabilitate themselves (par [780(14)]).

168 The respondents informed the applicants in June 1999 that the relationship was over but that the respondents would assist the applicants to sell their interests in the dealership in order to obtain and a fair price and that the sale process would be amicable. The respondents' conduct in relation to the sale process was completely at odds with the assurances given to the applicants that the respondents would assist the applicants in the sale process and that the process would be amicable (par [780(26)]). The respondents acted unfairly and unconscionably in acting to cancel the applicants' dealership (par [780(28)]).

169 Notwithstanding the unfairness, the Court refused the primary relief sought by the applicants, namely, retention of the dealership. The Court, has, however, sought to address the unfairness caused by the issuing of the termination notices and the effect that had on negotiations between the applicants and Westrac, at least in part, by providing what the Court considers to be a fair period of additional time for the applicants to re-visit the prospects for a sale. It must not be overlooked that it was the applicants' conduct in the first place that generated the respondents' decision to sever the relationship and, further, that the applicants did obstruct and delay the sale process.

170 Notwithstanding that there was unfairness on the part of the respondents in the manner they went about seeking to end the relationship, if a sale is not achieved then the point is reached, in my opinion, where it becomes a matter of applying the factors I have identified above in determining what is a fair and reasonable period of notice. It must be acknowledged that the applicants have been Caterpillar dealers since 1989 and that they built up a flagging business into a very profitable dealership. Clarke JA, in his dissenting judgment in Crawford Fitting, regarded the length of time during which the distributorship agreements operated as a most important factor in ascertaining a reasonable period and said in respect of the respondent distributors in that case at 459 "The fact that they had devoted all their attentions to these contracts for such a long period would obviously serve to make more difficult their efforts at redeployment."

171 On the other hand Priestley JA, who agreed generally with the judgment of McHugh JA, said at 440-441 that once notice was given "the shorter the period of notice, within the limits of reasonableness, the better." As I intimated in interlocutory judgment No 13, and for the reasons expressed in the primary judgment (see pars [124, 405, 670, 780(10), 780(11), 786(9), 786(10) and 786(11)], this is the view I hold. Moreover, it is clear from Crawford Fitting that in determining what might be a reasonable period of notice it is not only the interests of the outgoing party that must be taken into account but also the interests of the terminating party: McHugh JA at 450.

172 The second factor is the need to provide a reasonable opportunity for the applicants to enter into alternative arrangements. In this regard, the question arises as to whether the period of any notice that might be considered to be reasonable in order for the applicants to enter into alternative arrangements should be discounted by the opportunity the applicants should have taken after October 2000 to consider and explore such alternative arrangements. As I have already noted, the applicants did engage in some forward planning and preparation with respect to their options but I accept the applicants' submission that it is not open to conclude on the evidence that the applicants had in that period (or since) made firm and final decisions or plans as to what they were going to do with their business. As the applicants submitted: Quite apart from the difficulties that the Applicants would have confronted had they taken active steps to set up another business or to take on another distributorship business or to windup/wind down their Caterpillar dealership business (namely that the Respondents would have sought to have the injunction immediately lifted and otherwise used such information to support their thesis that the Applicants were not "genuine" in pursuing their claim for primary relief), such was the contingency then confronting the Applicants that it would have been impossible for them to make any firm decisions about their future.

173 Nevertheless, the evidence shows that some consideration and planning - short of the making of any firm and final plans - was carried out in respect of the applicants' alternatives if they did not keep the dealership. It is, therefore, appropriate to discount any period of notice arrived at by applying the Crawford Fitting factors by an appropriate amount that pays regard to the planning undertaken by the applicants contingent upon them not retaining the dealership.

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.

176 As to the rental/operating lease company business or the sales and service of used equipment, the applicants are already reasonably well set up to launch immediately into those businesses and even if they had to scale down their existing operation by selling parts of it, or alternatively acquire or merge with other businesses in that line of work, I cannot imagine it would require more than six months in which to do that.

177 The third factor is the need to allow time to carry out existing commitments. This raises for consideration a host of commitments including leases, finance facilities, inventory, wages and salaries including redundancy payments, disposing of land and premises including purpose built premises, termination and/or relocation of staff including apprentices, various contracts with customers and suppliers such as warranties, rentals, equipment and parts sales, buy backs and FOCUS contracts extending over a number of years.

178 In relation to financing, the respondents referred to a facsimile from Ms Shearman to ABN Amro dated 31 January 2001 where Ms Shearman stated: While we understand the principle that a termination would trigger the need to repay the loan, in practice a large percentage of the funds needed to repay the monies in full would come from the re-sale of our parts and new machine inventories back to Caterpillar of Australia. This is a process which is provided for in the Dealership Agreement, therefore making it "automatic". However, there could be some days delay in receipt of the funds into our account. … We seek the Bank's acknowledgment that it understands a short delay in repayment is probable during the course of the repayment process.

179 Mr Danckert estimated the buy back of the inventory by Caterpillar would take several months given that Gough & Gilmour have tens of thousands of individual line items at 21 operating location (amounting to hundreds of thousands of individual items) which would need to be counted, packaged, invoiced and transported to a location nominated by Caterpillar.

180 There was also Mr Danckert's affidavit evidence where he stated: I assume that both Banks require their monies to be repaid in full [upon the termination of the dealership], then in my opinion Gough & Gilmour could not make the whole of such repayment from the proceeds of the return of all Caterpillar stock to CofA. … Even after receipt of payment from CofA for stock returned the Facilities would only be paid out in full following collection of receivables and receipts from the sale of used machines and parts. In my opinion it would take about a month to repay the Facilities in full, assuming CofA paid for a significant portion of the returned stock within that period. …

181 The applicants' bank, Westpac, expressed the view in its Credit Risk Analysis of the applicants' business as at August 2001 that: In the event of the termination of the distribution agreement, Gough & Gilmour have the right to compel CAT to repurchase all new Caterpillar inventory held by Gough & Gilmour. As illustrated in the attached "Borrowings Repayability Analysis" prepared by Bob Danckert (Finance Manager), the value of this "put" to CAT net of the CAT creditor balance as at 30 June 2001 is $17.7 million. This asset combined with the cash on hand of $10 million would largely satisfy the $40 million due to WIB and ABN Amro. In addition, there are other assets - other inventory, property, plant & equipment and trade receivables - available to satisfy any obligations to WIB and ABN Amro.

182 It does not seem to me that in order for the applicants to discharge their financial commitments, it would require a lengthy period of notice.

183 In relation to staff issues, the respondents submitted that: [T]he commercial reality, irrespective of whether a sale proceeds or not, is that the incoming Caterpillar dealer for the NSW and ACT territories will clearly have a need and demand for staff trained in the sales and servicing of Caterpillar products. It goes without saying that, even if the Applicants are unable to deploy all the staff they currently employ in any alternative business venture which they might enter into, those staff would be in an optimal position to obtain employment with the new Caterpillar dealer.

184 I consider this submission to be correct. Accordingly, the applicants' reliance on their commitments to staff as the basis for a lengthy notice period is not sustainable.

185 In relation to warranty obligations the respondents submitted that: [T]he commercial reality in relation to customer warranties in respect of Caterpillar goods purchased from the Applicants is that Caterpillar could, and would, make arrangements through an alternative dealer to meet customer demands and thus honour any continuing warranty obligations which the Applicants might potentially be required to meet post-termination.

186 As to FOCUS contracts the respondents submitted: [I]n the event that there is no sale, the evidence reveals that, in the event of termination of the First Applicant's dealership, Caterpillar has been prepared, with the agreement of customers, to assume responsibility to perform or cause a designee to perform the First Applicant's obligations under contracts between the First Applicant and a third party.

187 The evidence to which the respondents refer relates only to the Cadia mine contracts. However, I consider that it is reasonable to expect that it would be in the respondents' best commercial interests to take the same approach to all FOCUS contracts and that, in fact, is what would occur. I also consider that in respect of other contracts the applicants might have with customers and suppliers, the respondents would deal with them in the same way it proposes to deal with warranty and FOCUS contracts where, to do otherwise, it would impact adversely on the respondents' commercial reputation. If this were not to be the case and the applicants suffered loss, it may be a matter to be taken into account in the making of any money orders.

188 The fourth factor is the need to allow time for the applicants to bring current negotiations with customers and suppliers to fruition. This factor seems to have been derived from W K Witt (WA) Pty Ltd v Metters Ltd and General Industries [1967] WAR 15 at 24 where Hale J said: In my judgment, the plaintiff was entitled to a notice which would enable it to wind up its association with the defendant in a businesslike manner in the broadest sense of that term: in particular it would need to be able to bring to fruition negotiations which were already well advanced; where negotiations had just started it would need to be able to tell prospective customers of a deadline after which it would be unable to accept an order: and it would need to be able to give notice to customers with whom it had dealt but with whom it was not at the moment in negotiation that after a specified date it would no longer be able to supply the defendant's products.

189 Witt involved a situation where the defendant had indicated that the reason why it wanted to terminate the export agency agreement with the plaintiff was it the defendant intended to export its own goods. The Court considered that two months' notice was sufficient time to allow for negotiations between the plaintiff and its customers to be brought to fruition.

190 Given the size and spread of the applicants' dealership, in my opinion two months would be insufficient time to finalise current negotiations that are "already well advanced" and to give relevant notice to other customers and suppliers. However, in the absence of any evidence that the applicants require a lengthy period of time to complete these tasks, I cannot see why a period of about six months would not be sufficient.

191 The fifth factor is the need to allow time for the applicants to recoup extraordinary expenditure or loss where appropriate. I have already found that in the 13 years the applicants have been involved in the dealership, they have recouped any extraordinary expenditure or loss.

192 Given the Crawford Fitting factors, and having regard to the fact that the Court is considering those factors in the context of s 106, it is impossible to arrive at a conclusion that a period of notice of five years is justifiable. In pressing for this period of notice the applicants appear to rely particularly on the long term nature of FOCUS contracts which extend over eight to ten years and on the decision in Avis v Australian Mutual Provident Society (unreported, Schmidt J, CT 1310 of 1995, 21 December 1995). In relation to the submission that five years' notice is justifiable because of the duration of the FOCUS contracts, if such contracts are up to ten years' duration then it would not matter whether the notice period was six months, 12 months or five years, it still would not be sufficient time to allow the FOCUS contracts to run their course.

193 It would be unrealistic to believe that Caterpillar would not move to ensure that some 200 FOCUS contracts to which the applicants are a party are serviced appropriately upon termination of the dealership thereby minimising the prospect of damages claims against the applicants for breach of contract. As I have said already, if the applicants were to suffer damage as a consequence of the unfairness associated with the termination of the dealership, that might be a matter to be taken into account in determining any money orders.

194 As to the applicants' reliance on Avis v AMP, in the primary judgment I said: Other than in a general way, I do not regard Avis v AMP as providing any assistance in determining the matter before me. As the respondents submitted, the essential facts in Avis v AMP were entirely different to the present case. In relation to the findings of Schmidt J regarding notice of termination, there were very particular circumstances relating to the provision of interest free loans ('agency development loans' or 'ADLs') which were granted in order to assist in the establishment of AMP agency businesses and which were required to be repaid. 195 Nothing has been put to the Court that would remotely justify a period of notice of five years. I consider that a fair and reasonable period of notice is between six and nine months. Given that I have already concluded that any notice period I decide on should be discounted by the fact that the applicants have done some early planning for the eventuality that they might not retain the dealership, I consider that a fair and reasonable period of notice is six months.

196 The applicants referred to employment cases in respect of their claim regarding the period of notice. It was submitted that: [A]ny consideration of employment cases determined under section 106 or at common law wherein the question of fair and/or reasonable notice has been considered, will reveal that had Gough & Gilmour been senior employees of Caterpillar who had transformed the NSW dealership into the viable and extremely profitable big business that it is today would, on any view, have been entitled to reasonable notice in the range of 1-2 years (or payment in lieu thereof) given their age, seniority, length of service, and their contribution to the success of the Caterpillar business (see: Paviour-Smith v National Mutual Life Association of Australasia Pty Limited (1999) 91 IR 8 at 64 (2 years' notice) ; Quinn v Jack Chia (Australia) Limited [1992] 1 VR 567 (12 months' notice); Jager v Australian National Hotels Pty Limited (1998) 7 Tas R 43 (24 months' notice; overturned on appeal on other grounds: see [2000] TASSC 43); Sawyer v Cuttler Hammer Pty Limited [2001] NSWIRC 144 at 55, 62 (15 months' notice; leave to appeal refused: [2002] NSWIRC 233); Graham v Macquarie Bank Limited [2000] NSWIRC 253 at 147, 149 (12 months' notice); Sheffield v Brambles Australia Limited [2002] NSWIRC 3 (12 months' notice); Rankin v Marine Power International Pty Limited (2001) 107 IR 117 at 140 [235] - [236] (12 months' notice); Kwong v Microsystems (1996) 82 IR 255 (12 months' notice; upheld on appeal in Microsystems v Kwong (1997) 85 IR 237); Munro v Chubb Security Holdings Australia Limited [2000] NSWIRC 215 (21 months' notice) and Ogilvy & Mather (NZ) Ltd v Turner [1996] 1 NZLR 641 (CA) (18 months' notice)).

197 The principles to be applied in employment cases are fundamentally different from those to be applied in commercial contracts of the nature being considered here. Moreover, Messrs Gough and Gilmour are not employees of Caterpillar but rather are experienced and very capable businessmen who I have found will be in a position, if they do not sell their interests in the dealership, to redeploy their not insignificant resources into another business venture within a period of six months. To apply the employment analogy and provide for 12 to 24 months' notice would be unfair against the respondents.

198 The period of notice in the event that no sale occurs during the 90 days that I have allowed for such an event will, therefore, be 26 weeks. 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.

199 In relation to the sale process, the Court found in its primary judgment that: … in circumstances where the Respondents had taken a decision to change dealers, and had given the Applicants assurances that they would help them in the sale process in achieving a fair price for the dealership the Respondents by their last resort policy were under an obligation not to terminate the dealership unless and until they provided the necessary help in achieving that fair price (par [734]).

200 The Court found that: both the First and Second Respondent acted unfairly in relation to the sale process and their decision to cancel the dealership (par [781]). and further that: The Respondents' conduct in the sale process was also inconsistent with their assurances to the Applicants that they would help them in the process of achieving a fair price for the dealership. While some assistance was provided, at crucial stages in the negotiations that assistance was not forthcoming and the Respondents' decision to cancel was made without reasonable consultation with the Applicants. In my opinion, the Respondents' conduct in the sale process and in taking the decision to cancel was biased in favour the Stokes organisation and to a significant degree the Applicants were left out in the cold" (see: par [792]).

201 The applicants submitted that: The Respondents acted unfairly and unconscionably in moving to cancel the dealership. They showed distinct "partiality" towards the Stokes organisation; made no genuine attempt to obtain the Applicants' side of the story concerning the sale negotiations prior to deciding on 17 September 2000 to proceed to termination; gave no assistance to the Applicants to bring about a settlement despite the Applicants' desire for intervention and assistance; and made no investigation or evaluation as to whether the Applicants had behaved reasonably in the sale process, but instead accepted the Stokes organisation's version of events. The Respondents also did not meet with the Applicants prior to deciding to initiate the termination, despite being in the right place at the right time to do so (see: paragraphs 652, 653(k) and (l) and 654 to 656 generally of the Judgment).

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).

203 The relief claimed by the applicants to overcome this unfairness, such relief being manifested in clauses 6 to 9 of (the revised) Schedule B of the fourth further amended summons, was: [F]or the Court to make an immediate variation of the Overall Arrangement (and/or the Agreements) so as to put the Applicants back in the position they would have been in had the Respondents honoured the Fourth Assurance in the first place. This would, or should, have involved setting up appropriate mechanisms to maximise the prospect that the promised process would assist the Applicants to gain fair market value for their business.

204 As to the specific sale process provisions in Schedule B the applicants submitted:

s Clause 6(a) reflects the Fourth Assurance found by the Court and, for reasons advanced above in these Submissions, the Applicants submit that the unfairness found by the Court with respect to the Overall Arrangement (especially vis a vis the sale process) provides a proper foundation for the Court to vary the Overall Arrangement to ensure that the Applicants still have the proper opportunity to sell in a manner consistent with the Fourth Assurance, as originally promised by the Respondents. In the event that the Respondents then fail to honour this obligation, then the Applicants will seek compensation in phase 2 of these proceedings.

s Clause 6(b) is designed to ensure that any further sale process cannot drag on indefinitely.

s Clause 6(c) is designed to provide fair and proper protection for the Applicants in the event that the Stokes organisation is either not now interested in purchasing the Applicants' dealership business or not prepared to pay a fair price for it and yet the Respondents continue to refuse to permit the Applicants to endeavour to sell the business to any other acceptable dealer candidate.

s Clause 7(a) is designed to correct the unfairness found in the sale process that arose, inter alia, because there was no requirement that any disputes between the Stokes organisation and the Applicants be resolved via dispute resolution.

s Clause 7(b) is designed to ensure that the Applicants are not "hindered" by any conduct on the part of Caterpillar during the course of any further sale process. That is, it is designed to afford protection to the Applicants from conduct that may undermine or weaken their bargaining position in any negotiations with the Stokes organisation.

s Clause 8 reflects the appropriateness of having a dispute resolution mechanism in the event that there be a Buyer of Last Resort provision introduced so as to cater for the prospect that there may be a dispute between the Applicants and the Respondents concerning the appropriate price for the Applicants' dealership business [note: cl 8 was subsequently deleted by the applicants].

s Clause 9 is designed to correct for the unfairness that occurred in the earlier attempted sale process, assuming the Court is minded to provide the Applicants with a further opportunity to sell the business in accordance with the Fourth Assurance.

205 The applicants elaborated on their submissions supporting the adoption by the Court of cll 6 to 9 of Schedule B. The respondents submitted that the proposed variations embodied in cll 6 to 9 were both inappropriate and untenable. Reasons for that included the following: (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 of unfairness; (3) even if the relevant nexus was assumed for argument's sake to 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 poorly expressed, ambiguous, uncertain and unworkable; (6) the operation of the variations is apt to give rise to absurdity and nonsensical results; (7) the dispute resolution clauses are of a kind which, even if they were found in a contract voluntarily entered into between the parties, no Court would enforce; (8) the variations are inappropriate, given the Applicants' own highly culpable conduct (as found by the Court) in respect of the sale process; (9) the variations, even if made, would make no difference to the final outcome and would, in that sense, be pointless and futile; (10) the variations are unsupported by, and indeed inconsistent with, authority; (11) including the variations would inevitably lead to further disputes between the parties.

206 The respondents elaborated on each of the foregoing reasons.

Consideration regarding fourth assurance/sale process

207 The essence of what the applicants seek in relation to the fourth assurance/sales process is "to put the Applicants back in the position they would have been in had the Respondents honoured the Fourth Assurance in the first place." However, in doing so the applicants want to build an infrastructure around the bare bones of the requirement for the respondents to assist in the sales process by providing for a time limit in which the sale process is to occur, a dispute resolution mechanism and a buyer of last resort provision.

208 The respondents submitted, firstly, that much of the relief sought by the applicants by way of contractual variation is inconsistent with the findings in the primary judgment, the Court's refusal of the primary relief, and the Court's statements in interlocutory judgment No 13. The respondents pursued this contention by addressing each of the provisions in cll 6 to 9 of Schedule B. However, as a general proposition it was submitted that not only were the provisions inconsistent and unsupported by the primary judgment, they purported to re-agitate issues that were determined in the primary judgment. I have dealt with the issue of whether, in making the claims in Schedule B, the applicants are seeking to re-run their case and there is no need to address it further at this point.

209 A further general submission by the respondents was that Schedule B was inherently uncertain, the effect of its operation would be absurd or impractical, it was not contemplated at the time the parties entered into the dealership agreements, and its terms are unprecedented. As to the proposition by the respondents that the adoption of Schedule B would mean "the applicants would continue to be the Caterpillar dealer in New South Wales and the ACT for an aggregate period that could be in the region of 23 to 25 years", the applicants have made it clear that there would be no requirement to comply with the last resort policy before termination could be effected. The relationship would come to an end either by virtue of a successful sale process or upon the expiration of the notice period. A breach of the last resort policy (cl 1), the conditions prior to termination (cl 2), the relationship management provisions (cl 10) or the improvement plan (cl 11) only sound in compensation and do not permit the applicants to continue in the dealership. 210 Clause 6(a) proposes that: Caterpillar shall provide Gough & Gilmour with a proper opportunity to sell the dealership business to Caterpillar's preferred dealer candidate and will assist Gough & Gilmour 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.

211 The respondents contended that the Court did not find in its primary judgment that the respondents had failed to comply with the fourth assurance and, therefore, there is no proper foundation for any variation in the terms of cl 6(a). Clearly, the Court did find that the respondents assured the second and third applicants that if they agreed to sell their shares in the first applicant, that process would be conducted on an amicable and reasonable basis without duress and would provide an opportunity for the second and third applicants to receive a fair value for the shares; and that the first respondent would assist the applicants to achieve such an outcome.

212 The respondents further contended that even if it were assumed that there existed a finding of unfairness sufficient to provide a foundation for the insertion of a contractual provision (of some kind) in respect of the fourth assurance, the provision embodied in cl 6(a) fundamentally breaches the principle requiring that there be proportionality between unfairness and the relief granted in respect thereof. The respondents submitted that even if the respondents had carried out their alleged undertakings given in the fourth assurance it would not have made any difference to the applicants' conduct. It was submitted that: Caterpillar had already, over a period of many months, attempted to resolve issues which had arisen during the course of the sale process. It had proposed a way of addressing the impasse which had resulted from Gough's irrational (as the Court found) refusal to release the audit working papers. It had encouraged the Stokes organisation, notwithstanding the latter's frustration with the Applicants (frustration which the Court held that Stokes was entitled to feel, because of the Applicants' conduct), back to the negotiating table. It is submitted that the ultimate outcome would have been made no different by Caterpillar continuing to act in this manner. This is all the more so in light of the Applicants' complete unwillingness to sell, their lack of co-operation, their mischievous behaviour, and their obstruction and delay of the sale process. There is simply no basis at all for inferring that this conduct would have ceased, and the sale moved to a conclusion, by Caterpillar acting in accordance with the Fourth Assurance as pleaded by the Applicants.

213 The question of whether I should make an order varying the overall arrangement in the nature of cl 6(a) is a difficult one. It is superficially attractive because it simply requires the respondents to do what they assured the applicants they would do in the sale process and it may well have been the case, despite the hitherto unreasonable and uncooperative conduct of the applicants, that if the respondents had carried out their undertakings given in the fourth assurance, the sale would have gone through.

214 On balance, however, given that I intend to make orders varying the overall arrangement to provide the applicants with a further opportunity to sell, I do not propose to make an order to the effect that Caterpillar will assist Gough & Gilmour 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. Whilst it was a matter for Caterpillar to give the undertakings in the fourth assurance it was also a matter, unique to Caterpillar, how they might carry out those undertakings. I do not propose to put the Court in the position of having to supervise the conduct of sophisticated commercial parties in a sale process to the extent of ensuring it is carried out on an "amicable" basis. There is no amicability left, particularly in the wake of these proceedings. It is sufficient in my view to provide the applicants with additional time in which to sell and, in the meantime, to prevent Caterpillar from taking any action to undermine the sale process. Depending on what occurs in the sale process, and its outcome, any residual unfairness may be addressed by the Court through an award of compensation under s 106(5).

215 Clause 6(b) provides that "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". It was submitted for the respondents that the period of 26 weeks (30 weeks less four weeks) was "inappropriately long". For the reasons I have already expressed in connection with the issue of notice of termination, I agree that a period of 26 weeks to allow for a sale to be achieved is too long.

216 Clause 6(c) provides: … 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 dealership business solely by reference to its fair value as at September 30, 2000.

217 Clause 6(c) is the buyer of last resort provision. I propose to deal with this issue under a separate heading.

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.

221 I can see no reason in principle why the Court could not order the respondents to require a dealer candidate to comply with a dispute resolution procedure as a condition for being selected as the preferred dealer candidate. The question is whether the Court would order the dispute resolution mechanism proposed by the applicants. I will deal with the question in addressing the proposed clause 9.

222 Clause 7(b) appears to reflect the terms of the current interlocutory injunction. That is, as the applicants submitted, it: …is designed to ensure that the Applicants are not "hindered" by any conduct on the part of Caterpillar during the course of any further sale process. That is, it is designed to afford protection to the Applicants from conduct that may undermine or weaken their bargaining position in any negotiations with the Stokes organisation.

223 The respondents submitted that cl 7(b) bears no resemblance to, and has no nexus with, the conduct of the respondents about which the Court expressed findings in the primary judgment. It seems to me, however, if the Court were to make orders providing for a sale process it would be a necessary incident of that process to protect the applicants whilst that process was being undertaken and that cl 7(b) would provide such protection.

224 Clause 8 of the original version has been deleted. The applicants accepted that the dispute resolution process outlined in clause 9 of Schedule B applying in the context of an attempted sale between the applicants and the preferred dealer candidate - would have no work to do in a buyer of last resort context (clause 6(c) of Schedule B). 225 Clause 9 sets out the dispute resolution mechanism proposed by the applicants. In support of its adoption by the Court the applicants submitted that cl 9 was: … designed to correct for the unfairness that occurred in the earlier attempted sale process, assuming the Court is minded to provide the Applicants with a further opportunity to sell the business in accordance with the Fourth Assurance. If introduced it would operate in a quick and final way so that the sale process would be successfully concluded or, if it failed, there would be a clear indication as to whether or not the Applicants' behaviour was or was not responsible for the failure of the process. As is clear from clause 9(d)(ii), in the event that the Applicants were not responsible for the failure of any such sale process then this would trigger the Respondents' Buyer of Last Resort obligation referred to above. The express reference to Don Coonan and Jim Owens (as favoured umpires) is based on the clear evidence before the Court as to their knowledge and experience with Caterpillar dealerships and the likelihood that they would act in a bona fide and constructive way in resolving any outstanding issues between the Applicants and the Stokes organisation.

226 The respondents opposed the dispute resolution mechanism. Their submissions in this respect may be summarised as follows: · No reference is made to any case, whether in this jurisdiction or otherwise, in which a Court has seen fit to compel contracting parties (let alone non-parties to a contract) to engage in prescribed dispute resolution procedures by mandating the insertion of a dispute resolution clause, notwithstanding that the parties did not themselves see fit to include such provisions in the agreements.

· It is important that alternative dispute resolution or mediation procedures being entered into voluntarily by the parties, rather than such procedures being forced upon them.

· Whilst Courts have, in some cases, seen fit to order mediation over the objection of one of the parties, compulsory mediation is seen as generally inappropriate in circumstances where the parties are "sophisticated commercial parties" or where a case involves other parties (such as family members) who "no longer have respect for one another and are at loggerheads in an unseemly way" ( Yoseph v Mammo [2002] NSWSC 585 at [9], [10] per Barrett J; see also Harvey v Alecci [2002] NSWSC 898 at [29], where Einstein J took the view that "the state of enmity" of the parties was not such as to make compulsory mediation "viable, possible, responsible or a proper exercise of the Court's undoubted discretion by compulsory order to order a mediation").

· It is clear from the Court's findings that the parties "no longer have respect for one another"; as the Court stated (at paragraph 786(11)), "the applicants' conduct and adversarial attitude towards C of A … undermined the maintenance of trust, confidence, respect and co-operation between the parties" The relationship has been "all but destroyed".

· It is clear that the New South Wales Supreme Court would not, pursuant to section 110K of the Supreme Court Act 1970, order compulsory mediation in the event that the sale process were the subject of extant legal proceedings in that Court.

· 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.

4. It may be open to the Court to take the approach proposed by the applicants, that is, in order to resolve any uncertainty or ambiguity about the provisions of cl 9 the Court could itself remedy the defects in drafting when making the orders or the Court could identify the nature and effect of the orders it proposes to make and direct the parties to come up with agreed short minute of orders reflecting the Court's findings. Given the deficiencies in cl 9, I regard this as a substantial task. The deficiencies include: a lack of precision, for example, there are no rules governing the conduct of mediation or conciliation (do the parties have to agree on the rules or may the umpires unilaterally impose the rules?); the proposed umpires are inappropriate; the alternative umpires have not been identified; the respondents have raised issues about the meaning of various expressions (e.g., 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"?); can one party unilaterally invoke the dispute resolution clause in the event that it alone believes that deadlock/breakdown has occurred, notwithstanding that the other party does not share that view?; what is to occur if separate sets of reasons reveal that one umpire declined to exercise his powers because he or she believed that Gough & Gilmour's approach was lacking good faith and/or reasonableness, while the other umpire declined to exercise his or her powers for reasons other than such a belief? It seems to me that an attempt by the Court to resolve these matters is likely to lead to proceedings in themselves and thereby cause further delay.

5. In the event that the reason for declining to make a decision pursuant to clause 9(c)(i) is that the approach of Gough & Gilmour in the sale process revealed a lack of good faith and/or reasonableness, Caterpillar is then required to terminate the dealership agreements by the giving of five years' notice. In other words, despite the fact that the applicants might be completely unreasonable in the sale process and have acted in bad faith, they would still be entitled to the same period of notice as if the agreements had been terminated because the umpires did not provide reasons or because the umpires were unable to agree, or because it was not possible for the parties to agree on the umpires. This would give the applicants the opportunity of having Caterpillar put, potentially, into the position of buyer of last resort in circumstances where no sale is achieved through no fault of the applicants but where the applicants are at fault they would still be entitled to retain the dealership for a further period of five years or a minimum of 15 months plus 45 months payment in lieu of notice. Such a proposition lacks fairness and balance.

229 In my opinion, the proposed dispute resolution procedure in cl 9 of Schedule B is not viable and is likely to generate even more controversy between the parties and result in further delay in resolving this matter. This is especially so given what I consider to be the "state of enmity" that exists between the parties. Mr Kimber SC for the applicants submitted, however, that in the context of Schedule B there was every incentive for the applicants to abide by the process and not act unreasonably or in bad faith because the period for selling their shares was limited and if the sale process were to break down because the applicants had acted unreasonably, Caterpillar was entitled immediately to terminate the dealership agreements.

230 It seems to me, however, there is little incentive for the applicants to conduct themselves reasonably or to act cooperatively in overcoming the deficiencies identified in cl 9. The applicants are in the position where the Court has refused their claim for primary relief. The applicants understand that they now have to vacate the dealership. They claim, however, they should not have to do that short of 60 months or, alternatively, 15 months plus 45 months' payment in lieu of notice. Such a period of notice, if it were to be granted, is a very substantial cushion against the effects of inevitable termination of the dealership agreements. It provides the applicants with a generous fall back position in the event they do not sell their dealership and given the respondents' strong desire to have the applicants out of the dealership at the earliest possible time, provides the applicants with a very strong bargaining position - a position that would allow them the opportunity to take advantage of the deficiencies in cl 9.

231 I also consider that the litigants are sophisticated commercial parties with access to high quality legal, financial and accounting advice and neither would be disadvantaged by the absence of a disputes procedure. The best solution, in the circumstances, is to provide the applicants with additional time to seek to sell their interests in the dealership but not to fetter the parties by imposing a somewhat artificial environment in the form of a disputes procedure. Depending upon the outcome of the additional opportunity to sell, the Court would then be in a position to assess whether, and if so to what extent, the applicants have suffered damage by the unfair acts or omissions of the respondents in the 1999/2000 sale process.

232 In their submissions in reply to the respondents' written submissions the applicants stated: It has been subsequently accepted by the Applicants that if the Court is not minded to introduce the sale process provisions set out in Schedule B, or at least the dispute resolution component of that proposed sale process/exit mechanism, then the Buyer of Last Resort provisions set out in Schedule B could not be included (as in such circumstances there would be no mechanism for triggering the operation of the Buyer of Last Resort provision).

233 The Court has, in fact, declined to introduce the dispute resolution mechanism in Schedule B and that, therefore, is the end of the matter as far as the buyer of last resort provisions are concerned. However, I am bound, firstly, to observe that the Court, in its primary judgment, did not find that the dealership agreements were unfair by reason of the absence of a buyer of last resort provision. Secondly, the proposed buyer of last resort provision as a remedy is grossly disproportionate to the unfairness suffered by the applicants and would not have been granted in any event. The applicants were well aware of the terms of the dealership agreements when they entered into those agreements and if the respondents had decided to terminate those agreements without having committed the acts of unfairness found in the primary judgment they would have been entitled to do so in accordance with the terms of those agreements subject to any challenge about the fairness of the notice period. Notwithstanding that it was the conduct of the applicants that brought about the decision by the respondents to terminate in the first place, the applicants now want the respondents to buy back the shares in the event that a sale does not proceed. This would not be a fair outcome.

234 This provision is set out in cl 10 of Schedule B and was said by the applicants to be designed to address the unfairness reflected in the following findings from the primary judgment:

· I have found that the first respondent acted unfairly in recommending in March 1999 that the relationship with the applicants be brought to an end …" (see: par [781] of the primary judgment); · 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 … (see: par [786(12)] of the primary judgment); · notwithstanding the first respondent's right, however, to terminate the Dealership Agreements without cause on 90 day's notice, supplementing this expressed contractual right was an understanding or arrangement that the respondents would take all reasonable steps to avoid the cancellation of the dealership. This was admitted to be the case and was seen to be important by Caterpillar for the reasons expressed by Fites in his 1996 Harvard Business Review Article in relation to the generational tenure of dealerships (see: par [789] of the primary judgment); · in my opinion, it was not open to the respondents to ignore or put to one side their obligations to do what was reasonably necessary to maintain the dealership before arriving at any decision to cancel (see: par [790] of the primary judgment); and · 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 their relationship with the first respondent. Moreover, this failure to treat the applicants fairly was compounded by the first respondent's use of the 1997 Report and its misrepresentation of the first applicant as a poor performing dealer (see: par [791] of the primary judgment).

235 The applicants submitted: The above findings of the Court, … inevitably lead to a conclusion and finding that the Overall Arrangement (and/or the Agreements) in this case were either unfair and/or operated unfairly over the years inter alia because of the "failures" by the Respondents to behave appropriately. That is, the Applicants submit that it is difficult if not impossible to make such findings of unfair/unconscionable conduct whilst at the same time concluding that there was no relevant unfairness in the contract and/or arrangement that permitted or failed to prevent such conduct from occurring.

236 It was further submitted that: [T]he above findings of the Court are such as to justify and warrant the Court making a finding … that the Overall Arrangement was relevantly unfair in that it failed to contain a provision in the form of, or to the effect of, the "Relationship Management" clause … such as to warrant the Overall Arrangement to be varied (either immediately or from some future date when the relationship actually ends) or a conclusion that the Overall Arrangement should be set aside (from some future date when the relationship has actually come to an end), so as to provide a proper foundation for the Court to thereafter make an appropriate money order to remedy the unfairness found in this regard. The absence of such a clause, and/or the First Respondent's failure to act in a manner consistent with the notions contained in that clause, effectively denied the Applicants an opportunity to fully understand the nature and extent of the problems in the relationship from an early stage and then to work, in conjunction with the First Respondent, to correct the problems that were undermining the sustainability of the relationship.

237 The respondents' submission opposing the relationship management provision may be summarised as follows:

· 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.

239 The respondents were correct in pointing out there was no specific finding of unfairness by virtue of the fact that the overall arrangement failed to contain provisions of the nature in cl 10. The respondents asserted that the Court could not now re-visit its primary judgment and countenance making such a finding. Although I express no concluded view about this - because for other reasons I do not propose to make orders in the terms of cl 10 - there are potentially sufficient findings in the primary judgment to be able to assert that the respondents failed in their responsibility to properly manage the relationship with the applicants. If these findings were the only consideration, it may be they could support a variation to the overall arrangement to provide for a relationship management provision.

240 However, in granting any relief it has to be proportionate to the unfairness of the contract or arrangement or the unfair conduct of the parties and moulded accordingly. What the applicants seek through their claim for a relationship management provision is the foundation for a claim for compensation. They contended, in effect, that if the respondents had properly managed the relationship this would have avoided the need to terminate the dealership; that if the relationship had been properly managed it would have given them the opportunity to "to correct the problems that were undermining the sustainability of the relationship" and having done so the dealership would have continued in the hands of the applicants at least for the foreseeable future. If this were to be acknowledged by the Court through a variation of the dealership agreements or the overall arrangement in the terms of cl 10 it would open up the respondents to a potentially large compensation claim. Is that justifiable?

241 The Court found in its primary judgment that the major contributors to the poor state of the relationship were the applicants. Moreover, the Court found that because of the history of poor relations and the applicants' conduct in the relationship, the first respondent was fairly entitled to recommend a change of dealer in New South Wales and the ACT. That conduct displayed a characteristic and ongoing and wilful disregard for the importance of co-operation, trust, confidence and respect in the relationship.

242 To take one example, Mr Gough's response to Mr Nitto's July 1992 letter was indicative of a general state of denial about the relationship difficulties. The message conveyed to Mr Gough by Mr Nitto in July 1992 was not accepted by Gough either then, or at any later time. Mr Gough's failure to understand or accept that Caterpillar Australia had legitimate concerns about his style and approach and his failure to address those concerns, contributed significantly to the decision that there be a change of dealer.

243 Whilst episodes of the applicants' culpable conduct were exacerbated by the respondents' management of the relationship, overwhelmingly the blame for the relationship breakdown lies squarely at the feet of the applicants. It would be entirely inconsistent with findings that the applicants were the root cause of the respondents' decision to change dealers and that the first respondent had proper grounds to recommend such a change in March 1999 (despite the respondents' relationship management failures), to now make the respondents liable for compensation claims on the basis that if they had better managed the relationship, the applicants could have continued in the dealership.

244 The other objection to cl 10 is that whilst it is proposed that it would only sound in compensation, it would be quite inappropriate to vary the dealership agreements or overall arrangement in order to remedy unfairness (albeit only notionally) if the provision was commercially unrealistic, unworkable, unenforceable for uncertainty and likely to lead to further disputation as submitted by the respondents. In this regard, there is substance in the respondents' criticism of the construction and wording of cl 10 and a number of the obligations that cl 10 impose on the respondents are onerous and unfair. Furthermore, in my opinion, even if the dealership agreements, or overall arrangement that was found to have existed, had contained a provision in terms of cl 10, it is unlikely that it would have made any material difference to the relationship in any event. The claim in relation to cl 10 is refused.

245 The improvement plan provisions are set out in cl 11 of Schedule B. The findings in the primary judgment relied upon by the applicants to support a variation in the terms of cl 11 were, in addition to the findings relied upon in respect of the relationship management provisions, as follows:

· 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.

247 The respondents contended clause 11 was both inappropriate and untenable for the following reasons which were elaborated on by the respondents in their submissions: (1) The variations are inconsistent with and ignore 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 would not have been countenanced by the parties had they been proposed at the time that the contract was entered into; (3) The variations are poorly expressed, ambiguous, uncertain, commercially, unrealistic and unworkable; (4) The variations run counter to the notions of relational contracts and the existence of a relationship based upon trust, respect, co-operation and communication; (5) Even if it was assumed for the purpose of argument that the relevant nexus with the Court's findings of unfairness existed, the variations are excessive and disproportionate to any unfairness found by the Court; (6) The variations are inappropriate, given the Applicants' own highly culpable conduct (as found by the Court) in respect of their relationship with Caterpillar; (7) The variations would inevitably lead to further disputes. (8) The variations, even if made, would make no difference to the final outcome and would, in that sense, be pointless and futile.

248 When it comes to the proposed improvement plan provisions, different considerations apply to those relevant to the relationship management provisions. Firstly, there were clear findings of unfairness in the primary judgment that are capable of underpinning a variation to the overall arrangement to provide for an improvement plan.

249 Secondly, whilst it was the case that the breakdown in the relationship was overwhelmingly caused by the applicants, thereby to a significant degree negativing any justification for a relationship management provision, the applicants' culpable conduct does not necessarily cancel out the justification for an improvement plan. This is because although the first respondent was entitled to recommend a change of dealer because of the history of poor relations caused by the applicants, that culpable conduct on the part of the applicants did not justify the unfair conduct surrounding the first respondent's decision to recommend a change. It was found in the primary judgment that 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.

250 Thirdly, whilst I expressed the opinion in relation to the relationship management provision that it would not have made any difference if it had been a provision in the overall arrangement, I do not consider I can come to the same view in respect of the proposed improvement plan provision. The respondents asserted that an improvement plan would not have made any difference because of: (1) The serious extent of the relationship problems between the parties; (2) The disposition of Gough; (3) The nature of Caterpillar's relationships with its dealers; (4) The results (or rather, the lack thereof) of previous attempts to address relationship problems; (5) The views held by numerous Caterpillar officers that an improvement plan would not work; (6) The findings with respect to a dispute resolution clause and the futility of further efforts.

251 The difficulties of achieving any improvement in the relationship must be readily acknowledged given the seriousness of the relationship problems between the parties and Mr Gough's disposition. However, the respondents' unfair conduct in failing to properly consider an improvement plan to allow the applicants the opportunity to rehabilitate themselves and in failing to observe the "last resort" policy cannot be dismissed on the basis of speculation that the applicants would not have mended their ways and that it, therefore, did not matter that the respondents had acted unfairly. It may equally be speculated that, confronted with unambiguous warnings about the tenuous state of their hold on the dealership caused by their conduct, the applicants may have mended their ways given their desire to retain the dealership and, in Mr Gough's case, to pass it on to his children.

252 Fourthly, although a variation to the overall arrangement in the terms of cl 11 might expose the respondents to compensation claims, I do not consider in doing so that would be inconsistent with the findings of unfairness subject, of course, to any compensation being just in the circumstances of the case.

253 Notwithstanding the foregoing observations, the question of whether, and if so to what extent, the applicants should be afforded any relief in relation to the respondents' unfairness in failing to properly consider an improvement plan to allow the applicants the opportunity to rehabilitate themselves and in acting unfairly and inconsistently with their "last resort" policy, is another of the more difficult issues to decide in these proceedings. Prima facie, the applicants are entitled to some relief because plainly the respondents' conduct was unfair. However, given the complex factual situation and the applicants' own high level of culpability that brought about the respondents' decision to end the relationship with the applicants, I have found it necessary to carefully consider each of the respondents' submissions as to why no relief is warranted. I deal with each of those submissions in turn.

254 It was submitted by the respondents that the variations in cl 11 are inconsistent with and ignore the findings in the primary judgment, the Court's observations in interlocutory judgment No. 13, and its refusal to grant the primary relief. The respondents referred to some 36 findings and observations by the Court in its primary judgment going to the applicants' culpable conduct and the Court's statements in interlocutory judgment No 13 that any alternative relief had to be:

(1) consistent with the findings expressed in the primary judgment; (2) consistent with the Court's refusal of the primary relief, and the reasons underpinning that decision.

255 The respondents submitted that: In light of such findings there can be no justification for the insertion of a provision into a contract, proposed to govern the prospective dealings between the parties, which is premised upon the very thing which the Court has said must not occur, namely, the parties remaining in the relationship. There is simply no legitimate basis for the Court to mandate the insertion of a provision requiring Caterpillar to take compulsory steps to address relationship problems with the Applicants prior to a decision being made that the parties should go their separate ways.

256 The respondents submitted that to insert an improvement plan in the overall arrangement in circumstances where the Court had refused the applicants' claim to retain the dealership and where the relationship is to be terminated, would be illogical and inconsistent. The respondents submitted that any variation to the overall arrangement had to be for the purpose of addressing the unfairness and not solely for the purpose of providing a 'gateway' to compensation. As the insertion of an improvement plan in the overall arrangement could not be said remedy any unfairness because the relationship was about to come to an end, the respondents submitted that such a variation could not be made.

257 I have dealt with the issue of so called "notional variations" earlier in this judgment. I can see no barrier to the Court in these proceedings varying the overall arrangement between the applicants and the respondents from an appropriate point in time to provide for an improvement plan notwithstanding that I also propose to make other orders enabling the respondents to proceed to terminate the dealership agreements. In other words, despite the fact that I have found that the relationship between the parties has broken down irretrievably, and has no future it is not beyond the Court's power to vary the overall arrangement to provide for an improvement plan in order to remedy unfairness.

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.

260 As to the proposition that imposing an improvement plan might create its own unfairness because the relationship between the applicants and the respondents was in the nature of a relational contract and that, therefore, the parties should be left to their own devices, I do not agree. The Court has found that the respondents committed acts of unfairness against the applicants and they are entitled to have considered by the Court whether and to what extent that unfairness should be remedied.

261 In relation to the specific submission by the respondents that an improvement plan/last resort provision is inconsistent with the nature of the relationship between the applicants and the respondents, that is the relationship is akin to a relational contract, I disagree. There was an expectation on both sides that the dealership was a long term arrangement and would only be cancelled if all reasonable steps to keep the dealership on foot had failed. In other words, cancellation of a dealership was a measure of last resort. As part of the relationship between the applicants and the respondents there was an obligation on the respondents to observe their last resort policy. The respondents' failure to provide the applicants with a final opportunity to rehabilitate themselves was inconsistent with the last resort policy. As the applicants contended, it was not open to Caterpillar to implement or ignore the last resort policy at its discretion unless, of course, the conduct of the dealer could properly be characterised as serious and wilful misconduct justifying summary termination. To have ignored the last resort policy in the manner that the respondents did was inconsistent with their obligations in the relationship with the applicants. Additionally, whilst the applicants must carry the lion's share of blame for the break down in the relationship, the respondents' conduct contributed to that break down. Given that contribution, it seems somewhat perverse for the respondents to contend that any improvement plan would have inevitably failed.

262 The respondents submitted that the evidence, and the Court's own findings, point clearly to the conclusion that, even if an improvement plan had been implemented in the present case, it would have made no relevant difference. I have already addressed this issue. Whilst the applicants' past conduct provides reason for considerable pessimism that an improvement plan would have actually worked, and even if it did the question might have been for how long, it is impossible to say categorically that the applicants would not have cooperated in such a plan.

263 The respondents submitted that an improvement plan would not have been contemplated by the parties had it been proposed at the time the contract was entered into, or at any later time. In light of the respondents' last resort policy, this cannot be so. The actual provision as reflected in cl 11 of Schedule B may not have been contemplated but certainly the spirit and intent of the respondents' last resort policy was that in order to avoid the cancellation of a dealership the respondents would assist the dealer to overcome any problems threatening the dealer's retention of the dealership. It would be unreasonable to contend that this assistance did not extend to relational problems.

264 The respondents submitted that the variations in cl 11 were poorly expressed, ambiguous, uncertain, commercially, unrealistic and unworkable. I regard cl 11 as being a viable provision, although the period of 12 months allowed for the improvement plan is too long. I consider six months is a more appropriate period.

265 The respondents submitted that the variations in cl 11 are inappropriate, given the applicants' own highly culpable conduct (as found by the Court) in respect of their relationship with Caterpillar. In this regard, it is worth recalling the Court's findings in its primary judgment concerning the circumstances in which Mr Nitto recommended to the second respondent that the relationship be brought to an end: It is clear to me that in allowing the 1997 material to be used in compiling the 1999 report, Mr Nitto disregarded his undertaking to Mr Gough and did so without informing Mr Gough that he did not intend to observe his undertaking. The consequence of this action on the part of Mr Nitto is that it may be assumed that he did not agree with Mr Gough that the 1997 Report was flawed or inaccurate but that in 1997 he was not prepared to thrash the matter out with Mr Gough. Nevertheless, Mr Nitto allowed Mr Gough to believe the slate had been wiped clean and there would be a new beginning. The alternative scenario is that Mr Nitto accepted the report was inaccurate and on that basis eliminated the report for measurement purposes. In 1999, however, he resurrected the 1997 Report and used it to compile the 1999 Report knowing it was at least in part inaccurate and knowing he had undertaken not to use it for performance measurement purposes. Whichever scenario is correct Mr Nitto misled Mr Gough.

453 I have already found that Mr Nitto found Mr Gough a difficult person to deal with. Probably this was the reason that Mr Nitto decided that the process of going through the 1997 report line by line with Mr Gough would be a wasted exercise because Mr Nitto believed it was unlikely, on Mr Gough's form, that he would accept the validity of the report. Mr Nitto consequently took the easy way out, which is characteristic to some extent of the history of the first respondent's dealing with Gough & Gilmour. In this respect it could be said Mr Gough had the first respondent bluffed. The problem with taking the easy way out over such a long period is that when it came to the point where the senior executives of the first respondent felt compelled to move to end the relationship with Gough & Gilmour, they again took the easy way out by avoiding any confrontation with Mr Gough. Without any indication or notice to him, and without any advice as to the reasons, the first respondent secretly put in train the machinery to end the relationship. In providing the second respondent with material supporting its desire to end the relationship, the first respondent did so knowing the material contained matters that Mr Gough regarded as inaccurate, incomplete and biased and in respect of which Mr Gough had been given an undertaking it would not be used.

454 In my opinion, this amounted to unfair conduct on the part of the first respondent. Notwithstanding its right to terminate the dealership agreements without cause, the first respondent decided, in effect, that it did have cause and proceeded to recommend to the second respondent that on the basis of relationship problems and a report highlighting the first applicant's poor performance, there should be a change of dealer. The report was not a fair assessment of the first applicant's performance and the first respondent was aware of Mr Gough's view that the report was inaccurate, incomplete and biased and contained material that the first respondent had assured the second applicant would not be used for performance measurement purposes. The report was, nevertheless, taken into account by the second respondent in the making of the decision to change the dealer. No attempt was made by the second respondent to check the accuracy or veracity of the report. Consequently, the second respondent made its decision to proceed with a change of dealer based at least in part on a report that was unfair and in respect of which the applicants had been denied the opportunity of commenting.

266 Whilst I have acknowledged on more than one occasion the level of the applicants' culpability, for which they will pay the price of losing the dealership, the respondents were also culpable. I do not regard the unfairness caused by the conduct of the respondents to have been so minor or inconsequential that it should be excused in the manner they propose.

267 I propose to vary the overall arrangement to include an improvement plan. I wish to make it clear that whether the Court will make money orders in connection with the improvement plan variation is a matter for the Court's discretion and the Court has not formed any view about this. If, however, the Court were to decide that money orders were appropriate the Court may only make orders that it "considers just in the circumstances of the case." In applying this test the Court would pay regard to what Schmidt J stated in Nordby v Barclays Investment Service (1993) 53 IR 319 at 338: A proper assessment of what relief should be granted by the Court cannot be one-sided, but must have regard to all the circumstances of the arrangements between the parties.

268 The Court would also take the approach proposed in Westfield Holdings Limited v Adams (2002) 114 IR 241 at par [159], namely, that: [I]n arriving at any tentative conclusions regarding money orders under s 106(5), prior to making any final determination, a trial judge would, metaphorically speaking, take a step back and consider the overall quantum of what he or she was proposing to order and whether or not it was just in the circumstances of the case.

269 The Court would pay particular regard to the fact that the applicants have been provided with an additional period in which to sell as well as a fair and reasonable notice period in the event that a sale is not achieved.

270 The provisions of Schedule B said to constitute the "Last Resort Provisions" are clauses 1 and 2. Clause 1 purports to make Caterpillar's right to terminate the dealership agreement conditional upon "Caterpillar first complying with the last resort policy". 271 Clause 2 seeks to impose on Caterpillar an obligation to take action (or refrain from taking action, as the case may be) which the applicants believe to be consistent (or inconsistent, in the case of action which Caterpillar is to refrain from) with the last resort policy. The action in question relates both to the period during which the dealership is on foot (clauses 2(a) and 2(b)), and the period during which a sale process is in progress or has at least commenced (clauses 2(c) and 2(d)).

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.

274 Generally speaking, the foregoing seven arguments opposing the last resort provision have been dealt with above in the consideration of the improvement plan claim. However, there are some additional matters raised by the respondents that need to be addressed. Firstly, the respondents submitted that there was a fundamental flaw in the "last resort" provisions urged upon the Court in that cll 2 and 3 of Schedule B require the parties to stay together and that this: (i) Cannot stand with the primary judgment. (ii) Constitutes an abuse of the Court's process. (iii) Would nullify the finding and conclusions expressed in the primary judgment.

275 This submission has also already been largely dealt with. The applicants are not proposing that the parties stay together. The last resort provision sought by the applicants seeks to address the unfairness of the failure of the respondents to adhere to their last resort policy but in terms of providing a remedy it would only sound in compensation.

276 The respondents submitted that: (i) The mere fact that Caterpillar did not fully comply with the last resort policy does not mean the Court will vary the agreements so as to impose obligations so to act. (ii) In considering the relevant findings and circumstances when addressing relief the Court will ask itself three questions: (a) What could the Respondents have done in order to act in the manner considered appropriate by the Court? (b) What would have occurred if the Respondents had acted in the manner considered appropriate by the Court? In other words, what (if any) difference would such action have made and have the Applicants proved, as they must, that a material difference would have resulted; (c) Whether the relief sought by the Applicants is connected with and proportionate to the unfairness found?

277 The respondents then proceeded in a comprehensive way to attempt to show that the Court should be satisfied that even if the respondents had behaved in a manner consistent with their last resort obligations (and the fourth assurance) that no different outcome would have resulted and, therefore, the Court should decline to grant the applicants any discretionary relief in the form of cll 1 and 2 of Schedule B. 278 There were two substantive episodes of failure by the respondents to observe their last resort policy. The first was in March 1999 when the first respondent decided to recommend to the second respondent that the relationship with the applicants should be brought to an end and did so without taking steps to allow the applicants every reasonable opportunity to retain the dealership. The second was in September 2000 when the respondents decided to terminate the dealership agreements, again without satisfying themselves there were no options open other than cancellation and that proper grounds existed to support cancellation.

279 As to the first episode, and the respondents' contention that if they had behaved in a manner consistent with their last resort obligations no different outcome would have resulted, I have already indicated as follows: If the respondents had put together a dossier on 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 relationships might be improved, the respondents would have established a proper foundation for moving against the applicants if the need arose.

458 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 of 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.

459 It might be argued that in the light of their right to terminate without cause it was quite unnecessary for the respondents to go to the trouble of preparing a relationship dossier and proposing an improvement plan. I note that notwithstanding the right to terminate without cause the first respondent, nevertheless, went to the trouble of preparing a report on the first applicant's performance in order to justify the termination. In any event, I consider it is clear from the evidence that Caterpillar's policy relating to termination, notwithstanding its right to terminate without cause on 90 days' notice, is that it is a "last resort" measure and that dealers are given every reasonable opportunity of remaining as a Caterpillar dealer. 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, especially, as the applicants submitted, "given the often life-long commitment of dealer principals to their dealership businesses and the significant number of employees and external contractors/suppliers whose livelihoods depend upon the continuation of the dealership relationships/contracts". Moreover, in hindsight it would have been a less disruptive, less distracting and no doubt a less distressing option to the course that matters ultimately took.

280 It should be apparent from what I have already said that I consider if the respondents had provided every reasonable opportunity to the applicants to remain a Caterpillar dealer matters may have turned out differently. The applicants may have improved their attitude and conduct towards the respondents had they been left in doubt as to the consequences of not doing so. As I stated earlier, it is simply impossible to come to the view that the applicants, keenly desirous of retaining the dealership, would not have done what was required by the respondents in order to keep the dealership; the alternative of cancellation would have been staring them in the face. 281 As to the second episode of unfairness, what the respondents are asking me to accept is that if they had given the applicants every reasonable opportunity during the sale process to avoid cancellation the outcome would have been no different. I cannot accept this contention. A key factor in the decision to cancel was that the second respondent believed that the applicants had reneged on a commercial agreement with the Stokes' organisation regarding the sale in August 2000 and that was simply not the case. If Mr Owens (Group President of the second respondent) had been aware that there had been no commercial agreement he may have taken a different course than approving cancellation. Neither the first nor second respondent made any inquiry to ascertain whether in fact the applicants had reneged on a commercial agreement.

282 Further, as the applicants contended, matters may also have turned out differently if: Messrs Ramseyer and Curfman had been honest and open with the applicants about Caterpillar's concerns as to the applicants' behaviour/good faith in the sales negotiations that took place during 2000; the first respondent had complied with the fourth assurance and rendered assistance to the applicants when they sought it in the period between late July 2000 and 29 September 2000; the respondents had, rather than proceeding to consider how a notice of cancellation may assist with the sale process, instead made concerted efforts to get the parties back to the negotiating table and to otherwise find the means or mechanism to assist with the resolution of the outstanding issues between the parties; the first respondent had provided the applicants and the Stokes' organisation with its own views about the reasonableness or otherwise of the stance adopted by either of the parties with respect to any of those issues (eg with respect to the Parramatta remediation retention sum, for instance); the first respondent had taken seriously the suggestion from the applicants in their letter of 29 September 2000 that there had been significant progress and agreement reached with many of the issues such that there was every reason to believe that with due attention a deal could be consummated.

283 As the applicants also submitted: [I]f Caterpillar's involvement in or investigation of the [sale] process revealed that the Applicant's were behaving unreasonably, then the Applicants could have been warned that this was the case and advised, in no uncertain terms, that unless a sale was consummated within a then specified period of time, that serious consideration would be given to cancellation …

284 I do not propose to vary the overall arrangement in the terms sought by the applicants in cll 1 and 2 of Schedule B. As I have already explained, there were two substantive episodes where the respondents failed to comply with their last resort policy. The first was the decision in March 1999 where the first respondent decided to recommend a change in the dealer for New South Wales and the ACT. The second was in September 2000 when the respondents decided to cancel the dealership agreement because of what they, unfairly, considered to be a failed sales process.

285 As to the first episode, it seems to me that the respondents' failure to observe the last resort policy, thereby causing unfairness, is addressed by varying the overall arrangement in the (amended) form of cl 11 of Schedule B. In this regard cll 1 and 2(b) are, therefore, superfluous. Clause 2(a) of Schedule B is redundant because I do not propose to vary the overall arrangement to provide for a relationship management provision as set out in cl 10 of Schedule B.

286 As to the second episode of unfairness, the applicants seek to address this in cl 2(c) and (in part) in 2(d) of Schedule B. I propose to vary the overall arrangement as follows: In the event that Caterpillar has complied with [clause 11] 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.

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.

288 The parties are directed to file and serve short minutes of order to reflect this judgment on or before 4.00 pm Wednesday 18 June 2003.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.