Bard Medical Pty Limited v Litha Medical Pty Limited
| Jurisdiction | South Africa |
| Judge | Satchwell J |
| Judgment Date | 04 December 2014 |
| Citation | 2014 JDR 0515 (GSJ) |
| Docket Number | 12/36593 |
| Court | South Gauteng High Court, Johannesburg |
Satchwell J:
INTRODUCTION
Plaintiff, a supplier of certain medical products, and defendant, a distributor of medical products, concluded an agreement for the distribution of three devices supplied by plaintiff. Plaintiff now claims damages from defendant alleging breach of contract in two respects: Defendant sold products of another supplier in competition with the three devices supplied by plaintiff and also failed to place orders to the stipulated minimum. It is common cause that defendant did distribute competing products and ceased placing orders with plaintiff during the lifetime of the disputed contract. Defendant has pleaded that it was not bound to any prohibition on the distribution of competing products and that plaintiff had failed to deliver orders promptly and expeditiously which meant that defendant was not obliged to place orders with plaintiff.
At commencement of trial this court ordered a separation of issues - the issue of liability only would be dealt with and the issue of quantum of damages (if any) was to be covered on a later occasion.
At issue is the distribution agreement concluded between the parties on 6th February 2012 which document formalized a fairly longstanding arrangement between them. The court must determine the import, if any, of the manuscript amendment made to the 'cover page' document by defendant; whether the written document constituted only the 'cover page' or the 'cover page' plus the '"terms and conditions' document; the import of the 'minimum purchases' provision in the 'cover page'; whether the agreement was only written or partly written and partly tacit or implied.
I heard evidence from Mr Charl De Klerk , managing director of plaintiff in South Africa ("De Klerk"), Mr Brendan Marshall, business unit manager at plaintiff, ("Marshall"), Mr Carlo Natali, ("Natali"), market manager for defendant, and Felicia Lipner, ("Lipner") administrative manager at defendant. Their evidence covers both the circumstances of the signing of the agreement and their understanding thereof as well as the commercial arrangements between the parties over a period of time prior and subsequent to the signing of this document.
2014 JDR 0515 p3
Satchwell J
CONTEXT TO THE AGREEMENT [1]
South African hospitals purchase goods and services from suppliers through tenders or procurement supply agreements. The court heard, for instance, that both plaintiff and defendant, are suppliers to the Life Health Group. During 2003 defendant met Venetec representatives in the United States and secured the rights to distribute and market the Statlok range of " peripheral IV securement devices" which included "clave needle-free connectors" furnished by ICU Medical USA to Venetec. Over a period of some three years, defendant built a significant presence in South Africa with the Statlok IV devices. However, during 2006 Venetec sold its business to Bard International. Defendant continued to be supplied with Statlok devices and to distribute them to hospitals in South Africa.
However, the relationship was not the same. It was not in dispute that communications and response times to orders was less than satisfactory for defendant. Orders had now to be placed with an order clerk in Germany, finished products were shipped from Mexico to the Netherlands and only then to South Africa, delivery times or orders increased from weeks to months and the complaints went unresolved. The memorandum written by Natali to a product manager in Germany speaks for itself [2] .
During 2010, defendant looked for and located a supplier of an alternative product, similar to the Statlok devices, in the United States and then concluded a non-exclusive agreement for the distribution of these Griplok devices in South Africa. Defendant then, subsequent to concluding its agreement to distribute the Griplok products in January 2011 [3] , carried out "test marketing" in South Africa and was marketing and supplying the Griplok products to non-contract accounts, such as Netcare and MediClinic, as a "defensive strategy" against plaintiff. When Statlok devices were not timeously supplied by plaintiff, defendant even substituted the Griplok products to hospitals who had contracted for the Statlok product from defendant.
De Klerk's predecessor at the plaintiff had made attempts during 2008 to conclude a written agreement with the defendant which came to naught. Nevertheless plaintiff continued to supply defendant with the Statlok devices for distribution without any formal agreement.
2014 JDR 0515 p4
Satchwell J
De Klerk took over at plaintiff in 2010 and had his first meeting with Natali and Lipner of defendant on 13th January 2011. He was made aware of defendant's frustration with plaintiff and responded that plaintiff had an internal customer services team with whom a meeting would be and was arranged for 22nd February.
Natali was adamant that he was open with de Klerk at their very first meeting that defendant had concluded the contract with Zefon as "backup", had completed "test marketing" and was about to start selling Griplok products in noncontract accounts. He said that this advice met with "no response" from de Klerk but "a blank stare". The evidence of both De Klerk and Marshall is that they were not informed by Natali of the Zefon contract nor of the pending distribution of the Griplok devices.
At a subsequent meeting of 28th July 2011, continuing difficulties in supply were raised by Natali and discussed between himself and De Klerk and Marshall. Natali testified that defendant's strategy in distributing Griplok devices had been successful in that the Griplok devices were "gaining traction" in the market and that he so informed de Klerk at this meeting. Natali's evidence was that it would be absurd for de Klerk to say that he had no knowledge about the distribution of the Zefon products during 2011, i.e. the Griplok devices, because the market in South Africa is so small. Both de Klerk and Marshall deny that Natali informed them that defendant was distributing the Griplok devices pursuant to the agreement with Zefon.
The last meeting of 2011 was on 29th November. De Klerk and Marshall testified that they both attended this meeting at defendant's premises when de Klerk handed a proposed agreement to Natali which included both the 'cover page' and the 'terms and conditions'; Natali says only Marshall was there on behalf of plaintiff and that no document was received by him. Natali recalls that, some days after the meeting of 29th November, he received an unsigned single page document (the 'cover page') in a white envelope. No 'terms and conditions' were attached thereto.
Natali inserted certain information into the 'cover page' and made a manuscript amendment to the document under the 'business terms' column. He signed the document and dated it 5th January 2012. He then returned the document to plaintiff. Thereafter it was received and signed by De Klerk who dated it 6th February 2012. Marshall acknowledged receipt thereof on 8th February and returned a signed copy to Natali [4] .
2014 JDR 0515 p5
Satchwell J
BREACH – DISTRIUBTION OF COMPETITIVE PRODUCTS
Pleadings
Plaintiff avers that the defendant was obliged during the term of the agreement "to refrain from the manufacture, import, promote the sale of, sell, deal in or distribute any products in the Territory which are competitive with Products, save for any products competitive with the Products sold, dealt with or distributed by the defendant as at the effective date of the Distribution Agreement and as specifically provided for as Excluded Competing Products" "without the prior consent in writing of the plaintiff". [5] In short, plaintiff relies upon the provisions of clause 7(a) set out in the 'Terms and Conditions' document to preclude distribution of the Griplok product whilst the defendant is being supplied with the Statlok devices.
Defendant has pleaded the parties entered into "a partly written and partly oral, alternatively tacit agreement" [6] and that POC1, i.e. the Cover Page constitutes the written portion thereof Defendant's plea specifies that "no restrictions were applicable in respect of the defendant's entitlement to distribute products that competed with those to which the distributorship related" [7] and that "Natali , in signing … did not intend to conclude a contract on behalf of the defendant with the plaintiff on the basis of the terms and conditions set forth in such unsigned pages" [8] .
Further, defendant has pleaded that "the unsigned pages allegedly forming part of annexure POC1 were not sent to or received by Natali" [9] . I do not need to make a finding on the disputed receipt of the 'Terms and Conditions' by reason of my finding on the construction of the written cover page itself. Similarly, defendant's plea that the "unsigned pages… contain clauses which were contrary to Natali's and de Klerk's previous discussions in relation to the proposed distributorship [10] " do not require a finding by myself by reason of my understanding of the clear language of the cover sheet. However, I have made some comments on the probabilities in respect of the discussions between the parties.
2014 JDR 0515 p6
Satchwell J
The Cover Page
The 'Cover Page' [11] is headed "BARD International Distribution Agreement for Exclusive Distributors" and comprises a section for "Distributor Information" to be inserted, a section for "Business Terms" to be inserted, a section on "Terms and Conditions" and a portion for signatures and dates.
In the "Business Terms" section there are three columns: the first apparently refers to paragraphs or clauses of another document (because the numbers do not follow chronologically ), the second identifies what information pertaining to "Business Terms" is...
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