Peters (Wa) Ltd v Petersville Ltd

• Jurisdiction: Australia Federal only
• Court: High Court (Australia)
• Judge: Gleeson CJ,Gummow,Kirby,Hayne JJ,Callinan J
• Judgment Date: 09 August 2001
• Neutral Citation: [2001] HCA 45,2001-0809 HCA D
• Docket Number: P64/2000
• Date: 09 August 2001

[2001] HCA 45

HIGH COURT OF AUSTRALIA

Gleeson CJ, Gummow, Kirby, Hayne and Callinan JJ

P64/2000

Peters (WA) Ltd

Appellant

and

Petersville Ltd & Anor

Respondents

Representation:

W S Martin QC with S M Standing for the appellant (instructed by Freehills)

T F Bathurst QC with A I Tonking for the respondents (instructed by Minter Ellison)

Trade Practices Act 1974 (Cth), ss 4M, 45–51AAA.

Peters (WA) Ltd v Petersville Ltd

Trade practices — Restraint of trade — Sale of business — Appellant manufactured and sold ice cream products in Western Australia under the ‘Peters’ marks — Respondents manufactured and sold ice cream products under the ‘Pauls’ marks nationally and under the ‘Peters’ marks in every State except Western Australia — Sale of respondents' Western Australian ice cream business to appellant — Sale agreement provided that the appellant be granted the exclusive right and licence to use the ‘Pauls’ marks in Western Australia in return for percentage royalty — Sale agreement contained covenant restraining respondents from selling ice cream products in Western Australia — Restraint coextensive with duration of licensing arrangements but extended to ice cream products to which licensing arrangements not applicable — Whether restraint is one to which the common law restraint of trade doctrine applies.

Trade practices — Restraint of trade — Circumstances in which the restraint of trade doctrine does not apply — Whether ‘sterilisation of capacity test’ should be adopted in Australia.

Trade practices — Restraint of trade — Development of common law respecting restraint of trade — Considerations of public interest — Relationship between doctrine of ‘restraint of trade’ and Trade Practices Act 1974 (Cth).

Words and phrases — ‘restraint of trade’ – ‘sterilisation of capacity’ – ‘fettering of existing freedom’ – ‘public interest’.

ORDER

1. Amend the style of the appellant to read ‘PB Foods Ltd’.

2. Appeal dismissed with costs.

Gleeson CJ, Gummow, Kirby and Hayne JJ.

The litigation

1 The respondents, Petersville Ltd (‘Petersville’) and Peters Foods Australia Pty Ltd (‘Peters Foods’), in litigation instituted by them in the Federal Court in 1996, sought a declaration that a contractual restraint imposed upon them in favour of the appellant, Peters (WA) Ltd (‘Peters WA’) 1, is unenforceable at common law because it is in restraint of trade. The respondents also contended that in threatening to enforce that restraint Peters WA had contravened or attempted to contravene s 45(2)(b) of the Trade Practices Act 1974 (Cth) (‘the Trade Practices Act’) 2 and that Peters WA had engaged in the practice of exclusive dealing contrary to s 47 of that statute.

2 Peters WA denied these claims and, in particular, defended the common law claim on two grounds. The first was that the restraint was not one to which

the common law doctrine applied. The second was that, in any event, the restraint was reasonable in the interests of the parties and the public. These two defences and other issues respecting the Trade Practices Act claims were ordered by Carr J to be tried and determined separately from and in advance of any further trial in the proceedings. It will be necessary later in these reasons to say something respecting the other issues. The parties furnished a statement of agreed facts and an agreed bundle of documents. Carr J made a declaration that the provision in question was void as being in restraint of trade 3. An appeal to the Full Court of the Federal Court (French, Kiefel and R D Nicholson JJ) was dismissed 4.

3 In this Court, Peters WA renewed its submission that the covenant in question does not impose any restraint within the meaning of the common law doctrine. In addition to rejecting that submission, Carr J had held that the restraint was not reasonable as between the parties and the Full Court upheld that holding. In this Court, there is no issue respecting the reasonableness of the restraint. Peters WA did use in its submission the phrase ‘inherent reasonableness’ to describe the class or kind of the agreement containing the restraint, but this was not used to develop fully an argument and appears not to have added anything to and distinct from its other submissions to this Court. The appeal stands or falls upon the submission by Peters WA that the provision does not impose any restraint to which the common law doctrine applies.

4 Before turning to consider the submissions by which Peters WA seeks to show that the common law doctrine does not apply in this case, it is convenient further to consider the relevant circumstances.

The facts

5 The various businesses of the parties in ice cream and related products had lengthy histories. The Peters WA business began trading in Western Australia in 1929. It obtained a trade mark registration for ‘Peters’ for ice cream and frozen confectionery, but the registration was limited to Western Australia. Petersville had its origins in Victoria in the same period and its operations expanded to New South Wales, South Australia and the Northern Territory. In Queensland, the brand name ‘Pauls’ was chosen in the 1930s by Pauls Ltd which was in competition in that State with Peters Arctic Delicacy Co Ltd. In 1960, these two

companies and another Queensland company amalgamated to form a company which, in the 1970s, became QUF Industries Ltd (‘QUF’). By 1980, QUF manufactured ice cream products in Queensland, Victoria and Western Australia. In Queensland, it used the ‘Peters’ and ‘Pauls’ brands and elsewhere marketed its products under the ‘Pauls’ brand.

6 In 1980, Petersville formed a partnership with QUF under the name ‘Australian United Foods’ (‘AUF’). The partnership manufactured and sold ice cream products under the ‘Pauls’ brand nationally and under the ‘Peters’ brand in every State except Western Australia. There is an agreed fact that:

‘Peters was positioned as a dependable, trustworthy but contemporary brand. Pauls was positioned as an exuberant and different brand, expert in providing novel treats.’

At the time of the AUF merger, it was Peters WA which manufactured and sold ice cream products in Western Australia under the ‘Peters’ brand and it still does so.

7 On 15 February 1983, QUF and Petersville entered into a written agreement with Peters WA (‘the Agreement’). The Agreement provided for the sale by the partners in AUF of their Western Australian ice cream business to Peters WA. The text of the Agreement gives rise to a number of questions of construction which, for present purposes, it is unnecessary to answer.

8 Carr J summarised the effect of the Agreement as follows 5:

‘(a) QUF sold several parcels of land in Western Australia, on which the ice-cream business of AUF was conducted, to [Peters WA] for $1,164,500 [Art 1];

(b) AUF sold the plant, equipment, motor vehicles and chattels used in its Western Australian ice-cream business to [Peters WA] for $519,000 [Art 2];

(c) AUF sold the stock in trade of its Western Australian ice-cream business to [Peters WA] for $752,000 [Art 2];

(d) AUF sold the right to use various Pauls and other associated trade marks in Western Australia, and the goodwill of AUF's Western

Australian ice-cream business, to [Peters WA] for $1,054,500 [Art 2];

(e) AUF agreed to grant, or procure the grant, to [Peters WA] of the exclusive right and licence to use the Pauls marks in Western Australia [Art 5];

(f) as payment for the exclusive right and licence to use those marks, [Peters WA] was required to pay a royalty of 2.5% on sales of all products bearing the Pauls marks (the licensed products) in Western Australia and on ice-cream products sold by [Peters WA] to Coles for resale as house brands as if they were licensed products [Art 5.4]. There was a minimum royalties provision [Art 5.6];

(g) [Peters WA] was entitled to market products and use advertising or promotions acquired or developed by AUF under the “Peters” mark on the basis that such products were to be considered as licensed products [Art 7.3];

(h) AUF agreed to provide [Peters WA] with access to AUF's manufacturing know-how, product development and technical marketing information in relation to ice-cream products marketed by AUF, in return for reimbursement of expenses [Art 7.2];

(i) QUF and Petersville covenanted not to sell, supply or distribute to any person in Western Australia ice-cream or frozen confections manufactured or distributed by either of them [Art 7.1]; and

(j) the total purchase price was $3,490,000.’

9 The covenant identified in (i) contained the restraint with which this litigation is concerned. It appears in the Agreement as Art 7.1 and reads:

‘Each of QUF and [Petersville] covenants and agrees with and for the benefit of [Peters WA] solely for the protection of [Peters WA] in respect of the goodwill of the ice cream business but subject to the due performance by [Peters WA] of its obligations hereunder and except as herein permitted that they and each of them will not:

• (a) sell, supply or distribute to any person in Western Australia ice cream or frozen confections manufactured or distributed by them or either of them;

• (b) sell, supply or distribute to any person anywhere ice cream or frozen confections manufactured or distributed by them or either of them where such ice cream or frozen confections are to the knowledge of QUF and [Petersville] or either of them ultimately intended for sale supply or distribution in Western Australia whether by the first-mentioned person or another person;

• (c) carry on in Western Australia directly or indirectly and whether as principal or agent the business of manufacturer, distributor (or either of them) of ice cream or frozen confections; or

• (d) permit any subsidiary or related company (within the meaning of those expressions under the Companies (Western Australia) Code) of...