Starlink International Group Pty Ltd v Coles Supermarkets Australia Pty Ltd & Anor

Judgment 1The plaintiff, Starlink International Group Pty Limited, provides "Trolley Collection Services" (the Services) to the defendants, Coles Supermarkets Australia Pty Limited and Kmart Australia Limited. The Services are the collection of shopping trolleys from car parks and other areas near the defendants' shopping centres and their return to designated locations for use by the defendants' customers. The plaintiff has been providing the Services to Coles since 2005. However other companies controlled by the Managing Director of the plaintiff have been providing the Services to Coles for approximately 17 years. These proceedings arise out of a dispute in relation to the defendants' purported termination of the commercial relationship with the plaintiff on 13 July 2011. The Agreement 2There are a number of different agreements between the plaintiff and the defendants in respect of the provision of the Services in various States and Territories of Australia. They are in identical terms and it is appropriate to refer to the terms of just one agreement (the Agreement). There is no issue that the Agreement was for a period of 36 months (excluding options) expiring in early March 2012. The plaintiff was contracted to provide the Services at various "Sites" in a particular "Municipality" (Sch 3 and Sch 4). The number of Sites in each Municipality varied, as did the number of "street collections" per week that the plaintiff was required to provide at a Site. The "Service Fee" that the plaintiff was entitled to charge was the "Weekly Normalised Recommended Price" that varied from Site to Site (Sch 4). The Service Fees were adjusted annually in accordance with an agreed formula (Sch 4). The plaintiff was obliged to comply with certain standards of performance, failing which the defendants could pursue various options including removing Sites from the scope of the plaintiff's Services (cl 3.5). 3The parties agreed that during the term of the Agreement and after its termination, the plaintiff would keep the defendants' "confidential information", as defined, "strictly confidential" (cl 1.1 and 10). It was also agreed that the defendants were entitled on reasonable notice to audit all of the plaintiff's "files, records and invoices" pertaining to the Services and related expenditure (cl 7). The parties agreed on Key Performance Indicators, or KPIs, to measure the plaintiff's performance "with the aim of continuous improvement in meeting the identified service levels and increasing the benefits" to the defendants and the plaintiff "during the Term" (cl 1.1, cl 14 and sch 7). The plaintiff was entitled to use subcontractors with the prior written consent of the defendants that they agreed would "not be unreasonably withheld" (cl 15). 4The parties agreed that "any conflict or inconsistency" between the terms of the Agreement "and other documents to which it refers" were to be resolved according to an order of precedence that gave priority to the Special Conditions (cl 1.3). 5The Agreement included the following terms: 17. Termination 17.1 Early termination by either party Either party may terminate this Agreement by providing the other with written notice if: (a) the other party breaches a material provision of this Agreement and fails to remedy that breach within 14 days of receiving notice from the non-breaching party requiring it to do so; or (b) the other party becomes Insolvent. 17.2 Early termination by Coles Coles may terminate this Agreement by providing the Service Provider with 30 days notice if: (a) the Service Provider repeatedly and consistently fails to perform the Services in accordance with the measurements of the KPIs; (b) there is any material change in the direct or indirect beneficial ownership or control of the Service Provider which, in the reasonable opinion of Coles, will affect the Service Provider's ability to perform its obligations under this Agreement; or (c) the Service Provider commits any act or does any thing which is (sic) brings the Service Provider's reputation into disrepute and as a consequence Coles believes that to continue to associate with the Service Provider would be detrimental to its own reputation. ... 18. Disputes 18.1 Parties to try to resolve (a) If a Dispute arises about the operation of this Agreement, the parties should first attempt to resolve it at Brand level, as appropriate. In general, this means between the relevant Brand contact and the Service Providers primary contact responsible for the supply of Services to that Brand. (b) If resolution of the Dispute cannot be achieved at Brand level within a reasonable period, the Dispute should then be escalated to more senior management for both parties. In the case of Coles, the Coles Representative must also be included in resolving the Dispute. (c) If a party considers that a Dispute has still not been resolved under clause 18.1(b), that party must promptly send a notice to the other party ( Dispute Notice ) setting out a full description of the Dispute. (d) Once a Dispute Notice has been given under clause 18.1(c) the Chief Executive or Managing Director of each party (or their nominee or delegate) must attempt to resolve the Dispute in good faith, on the basis that the parties wish to retain a long term commercial relationship. 18.2 Proceedings are last resort (a) If the Dispute is not resolved within 30 calendar days of the Dispute Notice, or any longer time the parties may agree, either party may commence or initiate appropriate legal proceedings. (b) Neither party may commence nor initiate any court proceedings (except applications for urgent injunctive relief) until the procedures set out in clauses 18.1(c) and 18.1(d) have been followed. 18.3 Contract performance Each party must continue to perform this Agreement despite the existence of a Dispute or any proceedings under this clause, except if the Dispute renders it impossible to do so. ... 20.4 Entire agreement This Agreement, including its schedules and annexures: (a) constitutes the entire agreement between the parties as to its subject matter; and (b) in relation to that subject matter, supersedes any prior understanding or agreement between the parties. 20.5 Governing law This Agreement is governed by the laws of the State of Victoria, Australia. The parties submit to the non-exclusive jurisdiction of the courts of Victoria. ... Schedule 3 - Specifications ... 8 REPORTING & KPI'S 8.1 On a frequency advised by each brand, the Service Provider will ensure that its Key Personnel are available to participate in performance reviews to review the Service Provider's performance of the Services under this Agreement against the KPIs. 8.2 Among other things, at any performance review meetings with Coles Group, the Service Provider: must advise Coles Group of any problems encountered in the course of providing the Services and the suggested steps that could be taken to remedy those problems; and should identify further efficiencies or innovations to reduce cost and improve performance levels, in line with generally accepted industry best practices. 8.3 Coles Group will advise the Service Provider the format and nature of Reports (if any) required during the Term. The content of Reports and frequency of production may vary from time to time. 8.4 During the Term, the Service Provider must keep accurate records relating to the provision of the Services, its performance of its obligations under this Agreement, and of all information and data necessary to produce the Reports. 8.5 If Coles Group is not satisfied with the performance of the Services at a particular Site, the parties will follow the Escalation Procedures to attempt to rectify the performance issue. If after finishing the Escalation Procedures the issue has not been rectified to Coles Group's satisfaction, Coles Group will be entitled to terminate the Services from that Site by giving the Service Provider 30 days written notice. 8.6 If a party considers that a dispute has arisen, that party must notify the other party of the dispute and specify in detail the matters in dispute or over which there is a difference. 8.7 The Brand Expenses Manager and Vendor Manager of Coles Group and Key Personnel of the Service Provider (or their nominees) must attempt to resolve the dispute on the basis that Coles Group and the Service Provider wish to retain a continuing commercial relationship. 8.8 In the event the Service Provider fails to meet the benchmark on the Period Report on two consecutive occasions, the Service Provider must provide an action plan to bring the store up to standard. In the event they fail to deliver on the action plan, the site may be taken off them. 8.9 Service Providers that have in excess of 10% of their total sites not achieving the benchmark at any given time may be excluded from quoting for new and or additional business at that point in time. ... Schedule 9 - Special Conditions