Vok Beverages Pty Ltd v Diageo Brands BV [2014] NSWSC 1090 (13 August 2014)

Last Updated: 14 August 2014

Supreme Court New South Wales

Case Title:	Vok Beverages Pty Ltd v Diageo Brands BV
Medium Neutral Citation:	[2014] NSWSC 1090
Hearing Date(s):	31 July 2014
Decision Date:	13 August 2014
Before:	Ball J
Decision:	See paragraphs 51 and 52 of this judgment.
Catchwords:	PROCEDURE - civil - pleadings - application for leave to file further amended Commercial List Statement and for related order for discovery - whether amendments raise at least an arguable case - whether amendments consistent with just, quick and cheap resolution of proceedings - whether in the interests of justice that amendments be permitted
Legislation Cited:	Corporations Act 2001 (Cth), s 9 Civil Procedure Act 2005 (NSW), ss 56, 57, 58, 59, 60 Trade Practices Act 1974 (Cth), s 51AC (now the Australian Consumer Law, contained in Competition and Consumer Act 2010 (Cth), Sch 2)
Cases Cited:	Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596
Category:	Procedural and other rulings
Parties:	Vok Beverages Pty Ltd (ACN 100 599 362) (Plaintiff) Diageo Brands BV (First Defendant) Diageo Australia Ltd (ACN 004 167 720) (Second Defendant) Diageo Scotland Ltd (Third Defendant) Diageo North America Inc (Fourth Defendant) Ursus Vodka Holding NV (Fifth Defendant) The "Old Bushmills" Distillery Co. Limited (Sixth Defendant)
Representation
- Counsel:	Counsel: L V Gyles SC with Ms S Fendekian (Plaintiff) N A Cotman SC with J Tobin (Defendants)
- Solicitors:	Solicitors: Piper Alderman (Plaintiff) Gadens (Defendants)
File Number(s):	2013/21633
Publication Restriction:	None

JUDGMENT

1. This judgment concerns a further amended notice of motion filed by the plaintiff, Vok Beverages Pty Ltd (Vok), on 15 July 2014 seeking leave to file an amended claim. In order to explain the amendments Vok seeks to make, it is necessary to say something about the nature of the proceedings and their history.

Background

2. On 27 June 2006, Vok entered into a Distribution Agreement by which it was appointed the sole distributor in Australia of alcoholic products that were supplied by companies in the Diageo Group. Many, but not all, of the products were manufactured overseas by companies in the group, and those companies were parties to the Distribution Agreement, although all orders for imported products were placed with, and all invoices for those products were issued by, the first defendant, Diageo Brands BV. It is unclear from the evidence whether Diageo Brands acted as agent for other companies in the group or whether it sold the products as principal. Under the Distribution Agreement, Vok also distributed products that were supplied in Australia by the second defendant, Diageo Australia Ltd. The proceedings do not concern those products.

3. The Distribution Agreement essentially operated as a joint venture. Diageo was required to supply products at what was described as the "Transfer Price". Vok was responsible for distributing the products in Australia, and it paid "Diageo" the "Diageo Share of the Gross Profits made on all Products". "Diageo" was defined to mean "all or any one (as applicable)" of the members of the Diageo Group who were parties to the agreement, including Diageo Brands and Diageo Australia. I have used the name "Diageo" in this judgment in a similar way.

4. "Gross Profit" was defined in the agreement in the following terms:

"Gross Profit" means in relation to a Product and in relation to a period:

(a) gross revenue received by Vok from the sale of that Product in the period to its customers; less

(b) the Costs to Market attributable to that Product in that period.

5. "Costs to Market" was defined to mean:

... the sum of all costs of acquiring, selling and distributing the Products, namely:

(a) the Transfer Price paid by Vok to Diageo for the Products;

(b) the direct costs of any freight, shipping and transportation charges, levies, excise or import duties paid by Vok;

(c) any Discounts; and

(d) any other costs agreed between Diageo and Vok,

being collectively the costs and expenses directly associated with taking the Products to market ("Direct Costs"), but for the avoidance of doubt excluding any overhead costs of Vok associated with any of the foregoing which are not Direct Costs, or any profit margin or any GST or other value added tax.

6. "Diageo Share" was defined to mean 50 percent. "Transfer Price" was defined in the following terms:

"Transfer Price" means (subject to Clause 8.2), the price paid by Diageo for the Products but excluding any profit margin, which price Diageo shall pass on to Vok.

"Products" was defined to mean the products listed in Schedule 1, subject to agreement between the parties. They are the products that were sold to Vok under the Distribution Agreement.

7. Clause 8.2 provided:

Diageo may adjust the Transfer Prices referred to in Clause 8.1 only when the price paid by Diageo to Affiliates for the Products is adjusted.

"Affiliate" was defined to mean a holding company or subsidiary. Those expressions themselves were defined to have the meanings given to them by s 9 of the Corporations Act 2001 (Cth).

8. Clause 8.1 set out how Vok was to be invoiced for the products supplied to it. Relevantly, cl 8.1.2 provided that Diageo was entitled to invoice Vok for the Transfer Price plus the estimated Diageo Gross Profit within 20 working days of delivery and Vok was required to pay invoices in respect of imported product within 120 days. The clause also provided a mechanism by which the amount paid by Vok would be adjusted to reflect the actual Diageo Gross Profit that was earned during each financial year.

9. Clause 8.5 provided:

Vok will pay amounts due to Diageo in Australian Dollars by direct payment into a bank account nominated by Diageo, and notified to Vok.

10. Two other clauses of the Distribution Agreement are relevant. Clause 14.5 relevantly provided:

The parties acknowledge that the commercial arrangements between them are in a spirit of openness and following a principle of equitable profit-sharing. The parties agree to provide the other parties with reasonable access, on reasonable notice (which will be not less than 5 Working Days) to accounts, other records and information relating to payment obligations under this Agreement, including but not limited to the components of Costs to Market, Discounts and Gross Profit. ...

Clause 26.1 provided:

The parties will act in good faith towards each other in respect of all dealings or matters under, or in connection with, this Agreement.

11. Disputes arose between the parties concerning the agreement, and, on 19 May 2011, Diageo Australia commenced proceedings against Vok. Those proceedings were settled, and the Distribution Agreement was terminated with effect from 31 January 2012 by a settlement agreement entered into on 7 September 2011.

12. Vok then commenced these proceedings in the Supreme Court of South Australia on 25 October 2012. They were cross-vested to this Court. In its original claim, Vok asserted that Diageo had breached the Distribution Agreement by charging a price in Australian dollars for the product it supplied that was determined by reference to the exchange rate that applied at the time the Transfer Price for the product was fixed (at the beginning of each financial year) rather than a price in Australian dollars that was determined at the time Diageo invoiced Vok for the products that it supplied.

13. Vok sought to amend its claim in November 2013 to include a claim based on the Trade Practices Act 1974 (Cth) (now the Australian Consumer Law, contained in the Competition and Consumer Act 2010 (Cth), Sch 2) (the TPA). In substance, the proposed amendment raised the question whether Diageo had engaged in misleading and deceptive conduct by representing that it would convert the price for imported products into Australian dollars at the time Vok was invoiced for the product.

14. Diageo refused to consent to the proposed amendment, and, on 11 December 2013, its solicitors wrote a lengthy letter setting out its objections to the amendments. In response, on 12 December 2013, Vok filed a notice of motion, returnable on 7 February 2014, seeking leave to amend and seeking discovery of documents relating to the calculation of the price of the products during the period the Distribution Agreement was on foot. The matter came before the Court on 13 December 2013, at which time, by consent, the Court ordered that Vok respond to the letter from Diageo's solicitors by 20 December 2013. Vok did so by proposing some further amendments to the Statement of Claim that were designed to address Diageo's concerns.

15. The matter came back before the Court on 7 February 2014, at which time directions were made for the filing of evidence in relation to Vok's notice of motion, and the motion was set down for hearing on 27 March 2014.

16. On 21 March 2014, Vok filed an amended notice of motion. By that notice of motion, it sought to file another version of the Statement of Claim. In substance, that version raised two issues. One concerned the exchange rate. However, the Statement of Claim also sought to raise a new issue that the price Diageo charged Vok included a profit margin. That was said to be so because the prices charged by Diageo in United Kingdom pounds increased over the period of the agreement whereas Diageo's annual reports stated that there had been a decrease in the costs of raw materials and consumables over the same period. Again, Vok also sought to plead a case to the same general effect under the TPA based on representations that Diageo was alleged to have made. In addition, Vok amended its claim for discovery to seek a range of documents relevant to the way in which Diageo calculated the price of the imported products it supplied to Vok.

17. Following the filing of the amended notice of motion, the matter was re-listed on 24 March 2014. Up until that time, the amendments proposed by Vok were made by reference to the form of pleading filed in the Supreme Court of South Australia. On 24 March 2014, the Court dismissed Vok's motion and ordered it to serve amended documents in accordance with the practice in the Commercial List by 31 March 2014. The Court also provisionally fixed the matter for hearing for 8 days commencing on 1 September 2014, which was changed by order made by the Court the next day to 29 September 2014.

18. The Commercial List Statement served by Vok in accordance with the Court's directions raised substantially the same issues as the previous Statement of Claim. However, it made further amendments to the claim based on the TPA by including a claim that Diageo engaged in unconscionable conduct in contravention of s 51AC of the TPA. Again, however, the underlying complaint was still a complaint that Diageo had included a profit component in the price that it charged for the product it supplied and had failed to supply the product at the then current exchange rates, contrary to the representations it had made. A further claim was also sought to be included in respect of the profit share paid to Vok in respect of one product, Dimple whisky. However, that amendment can be put to one side for present purposes.

19. Diageo did not consent to Vok filing the proposed Summons and Commercial List Statement, and, on 17 April 2014, Vok filed a motion seeking leave to make the amendments embodied in those documents.

20. The matter came back before the Court on 2 May 2014. It was apparent at that time that Vok sought to allege that the price it was charged included a profit component but that it had insufficient information concerning how the price was calculated to give particulars of the profit component alleged to be included in the price. It was Diageo's position that the prices paid by Vok included no profit component. The Court suggested that the parties confer on a procedure which would involve Diageo discovering sample documents by reference to which Vok's claim could be tested. The Court also directed that Vok file an amended motion by 2 June 2014 setting out the discovery it sought.

21. On 20 May 2014, Vok served a proposed amended Commercial List Statement. The new Commercial List Statement relevantly raised two new issues. First, relying on cl 14.5 of the Distribution Agreement, it pleaded that Diageo had an obligation to provide Vok with reasonable access to accounts, other records and information relating to payment obligations under the agreement, that Diageo had refused to provide that information and that, in those circumstances, "Vok seeks a preliminary account as to the Transfer Prices presented by Diageo during the course of Agreement, or such limited Transfer Prices as the Court sees fit". In addition, the following paragraph was inserted as para 13A:

It was an implied term of the Agreement that where it was necessary for any costs incurred in the Agreement in a foreign currency to be converted to AUD for the purposes of the Agreement, that this conversion would be done at the prevailing exchange rate at or about the date of the relevant Tax Invoice.

22. Vok's amended notice of motion was filed on 2 June 2014. It sought leave to file the Commercial List Statement in its current form and also sought extensive discovery.

23. There was further correspondence between the parties concerning the proposed amendments. In addition, on or about 16 June 2014, Diageo filed and served an affidavit of Ms Szaszik, which gives a detailed explanation of how the Transfer Price for a sample of the products the subject of the Distribution Agreement was calculated. The evidence given by Ms Szaszik is that each Diageo product, known as a Stock Keeping Unit (SKU), is given a unique number, and Diageo uses a standardised system to produce a single cost per SKU, "which was the same amount (in the production company currency) as was applied in all other transactions of Diageo in relation to that SKU internationally". Ms Szaszik then explains by reference to an internal Diageo PowerPoint presentation how the price for each SKU within a given period is calculated, and she attaches a spreadsheet showing the calculations in respect of three sample products in particular years. Ms Szaszik says that the price Diageo charged Vok was the "Standard Cost", which was calculated as the SKU cost plus primary freight. Primary freight is the cost of freight from the "place of supply" (that is, the factory) to the place of first warehousing. The SKU Cost is the sum of "Plant Costs" and "Supply Overheads". According to Ms Szaszik, "plant costs" are "all direct production costs which is the sum of the economic costs of production (spirit, dry goods (e.g. bottles, labels, caps), direct labour ... and plant overheads (being machinery operating costs) ..., plus a depreciation allowance on plant". "Supply overheads" are "indirect costs of the ordering and management of the supply". It is not entirely clear what those costs include, but it is apparent from the material annexed to Ms Szaszik's affidavit that they include items described as "order capture", "brand adjustment" and "other/equalisation". They also include support services, head office costs and pallet costs.

24. Ms Szaszik also gives evidence that, when product is sold between companies within the group, it is transferred at the intercompany selling price (ICSP), which is calculated as the Standard Cost plus BTP (Brand Thru Profit). However, the evidence given by Ms Szaszik is that the Transfer Price charged to Vok did not include the BTP.

25. Following receipt of Ms Szaszik's affidavit, Vok, on 26 June 2014, sent Diageo a further version of the Commercial List Statement. That included the following new allegation:

8AA. Further, it was a term of the Agreement that the Transfer Price would not include overhead and indirect costs in respect of the relevant products (Indirect Costs).

Particulars

(a) the term is express and arises on the proper construction of the definition of "Transfer Price" and "Costs to Market" in clause 1.1 together with clause 14.5 and 26.1.

(b) In the alternative, the term is implied to give business efficacy to the Agreement.

The Commercial List Statement also substituted two new allegations for the allegation that the amount charged to Vok impermissibly included a profit component. One was that, contrary to the term pleaded in the new para 8AA, Diageo included in the Transfer Price overheads and indirect costs. The other was that amounts charged for primary freight were excessive. The second allegation is based on a document attached to Ms Szaszik's affidavit, which sets out the price charged for primary freight for a particular SKU over the period from 1 July 2004 to 30 June 2013. That document is said to establish that the price for freight doubled over the period of the Distribution Agreement and then halved after the parties had agreed that the agreement should be terminated.

26. On 15 July 2014, Vok filed a further amended notice of motion seeking leave to file a Commercial List Statement in the form served on Diageo on 26 June 2014.

27. At the hearing of the notice of motion, Mr Gyles SC, who appeared for Vok, sought to make a further amendment to the proposed para 8AA so that it read:

8AA. Further it was a term of the Agreement that the Transfer Price would not include overhead and indirect costs in respect of the relevant products (Indirect Costs).

Particulars

(a) The term arises on the proper construction of the agreement as a whole, including by reference to the definition of transfer price and Costs to market in Clause 1.1, together with Clauses 14.5, 26.1 and the duty of co-operation owed by the parties at law;

(b) In the alternative, the term is implied at law;

(c) In the alternative, the term is implied by custom or to give business efficacy to the agreement.

28. During the course of the hearing, Mr Gyles proposed yet a further amendment by including after the words "would not include overhead and indirect costs" the words "other than plant and line overhead". This amendment was suggested to address an issue raised during the course of argument concerning the question whether the Distribution Agreement could be interpreted as excluding from the Transfer Price overheads incurred by Diageo in the manufacturing process.

29. It is apparent from the proposed amendments that Vok now seeks to argue that Diageo was entitled to include in the Transfer Price for each of the products supplied under the Distribution Agreement the costs of manufacture (including any overheads associated with the manufacturing process) plus the reasonable costs of transporting the manufactured products to the first place of warehousing. However, it was not entitled to include any other costs. In particular, it was not entitled to include any head office costs or other costs that were not directly attributable to the manufacturing process. It then seeks discovery from Diageo for the purpose of determining the extent to which any of those excluded costs were included in calculating the Transfer Price. Vok also seeks to amend its claim to claim that Diageo charged an excessive amount for transportation costs.

The amendments concerning overhead and indirect costs

30. The question whether the amendments should be permitted depends on two broad considerations. One is whether the amendments, if made, would be liable to be struck out because they fail to raise an arguable case or, to use the words of Barwick CJ in General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 130, whether the claim sought to be raised by the amendments "is so clearly untenable that it cannot possibly succeed". The other is whether the amendments should be permitted having regard to the case management principles stated by the High Court in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 and reflected in ss 56-60 of the Civil Procedure Act 2005 (NSW). It is not necessary to state those principles in any detail in the present case. In considering whether to permit an amendment, they require the court to have regard to the need to achieve a just, quick and cheap resolution of the real issues in the proceedings and require the court to have regard to the objects stated in s 57 of the Civil Procedure Act, which include the just determination of the proceedings, the efficient disposal of the business of the court and the timely disposal of the proceedings and all other proceedings before the court at a cost affordable to the respective parties. These two considerations are not entirely separate. The weaker the claim, the more significance other case management principles may have.

31. In my opinion, the claim sought to be advanced by Vok by its most recent amendments is not arguable; and, even if it were, I would not permit it having regard to case management principles.

32. As to the question whether the claim is arguable, "Transfer Price" is (subject to cl 8.2) defined to mean the price paid by Diageo for the products, excluding any profit margin. The definition is perhaps not as clear as it might have been because of the ambiguity in the meaning of "Diageo". It is tempting to read "Diageo" as the company that supplies a particular product. However, if that company is also the manufacturer of the product, it is difficult to make sense of a requirement that fixes the price payable by Vok by reference to the price paid by that company for the product. That company sells the product it manufactures. It does not buy it. It seems clear, however, that the expression "Diageo" is used more loosely in the definition of "Transfer Price" and that what is intended is that Vok should pay the same price for a particular product as companies in the Diageo group less any profit margin. That conclusion is reinforced by cl 8.2, which provides that Diageo may only adjust the Transfer Price when it adjusts the price it charges its Affiliates for that product. The amendments sought to be made by Vok over a number of months up until 26 June 2014 proceeded on that basis.

33. The most recent amendments sought to be made by Vok allege that it was a term of the agreement that the Transfer Price would not include overhead and indirect costs in respect of the relevant products other than plant and line overheads. However, the alleged term is inconsistent with the express definition given to the expression "Transfer Price" by the agreement. The express definition says that the Transfer Price is the price charged to other companies in the group less any profit margin. If the Transfer Price is, in fact, some price that excludes costs of various types, it is clearly not the price charged to other companies in the group less any profit margin.

34. The term on which Vok relies is said to arise from the express terms of the contract, or is to be implied as a matter of law or as a matter of fact.

35. Terms that are implied as a matter of law are generally terms that are implied in all contracts of a particular class because of a particular characteristic of that class of contract: Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410 at 420 per Brennan CJ, Dawson and Toohey JJ and 448 per McHugh and Gummow JJ. Here, however, the term that is sought to be implied is quite specific to the Distribution Agreement. For that reason alone, I do not think that it is arguable that the term can be implied as a matter of law.

36. In order for a term to be implied as a matter of fact, the term must meet the five requirements set out by the majority of the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 282-3: see Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596 at 605-6; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 at 347; Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410 at 441. It is not necessary in this case to set out those five requirements. It is sufficient to observe that the term must be obvious, must be necessary to give business efficacy to the contract and cannot contradict the terms of the express contract.

37. In my opinion, it is not arguable that the term contended for by Vok meets those requirements. The term is not obvious. It is unclear what costs are intended to be excluded and what costs are not, as the debate during the course of the hearing which led to the further amendment proposed by Mr Gyles made plain. The term is not necessary to give business efficacy to the contract. Without the term, Vok is required to pay the same price for product as other companies in the Diageo group are required to pay, less any profit component. It is difficult to see why an arrangement of that type does not make business sense. As I have explained, the term is inconsistent with the express definition of "Transfer Price".

38. Nor do I think that it is arguable that the express terms of the contract lead to a different conclusion. As I have explained, the term is inconsistent with the express definition of "Transfer Price", particularly when cl 8.2 is taken into account. It is difficult to see how cls 14.5 and 26.1 affect the position. Clause 14.5 is largely concerned with the right to obtain access to information. It also makes it clear that the arrangement is a profit sharing one. But a provision that states that the cost of the product should be the amount paid by other companies in the Diageo group less any profit component (which was to be passed onto Vok) is not inconsistent with a profit sharing arrangement. Clause 26.1 imposes a duty of good faith in connection with the performance of the contract. It is difficult to see how it can be interpreted as altering the agreement of the parties on the amount that Vok should pay for the product it buys.

39. Mr Gyles placed considerable weight on the definition of "Costs to Market". That definition is relevant to the calculation of the amount for which Vok must account. According to Mr Gyles, the agreement was intended to have a symmetry. The definition of "Costs to Market" prevented Vok from charging its overheads that were not the direct costs of any freight, shipping and transportation, etc. Similarly, Mr Gyles submitted that the parties intended that Diageo should not be entitled to charge indirect overheads incurred in the manufacturing process. However, why that should be so in the face of the express terms of the agreement is not clear.

40. Mr Gyles also submitted that the question of the correct interpretation of the agreement was a matter for the trial. That is so. However, as Barwick CJ pointed out in General Steel at 129-30, the requirement that a case only needs to be arguable does not exclude the possibility that a detailed analysis may have to be undertaken to determine whether it is or not. In the present case, in my opinion, Vok is unable to explain why the express terms of the contract do not mean what they say.

41. Even if the claim is arguable, in my opinion, it is not in the interests of justice that Vok be permitted to raise it at this stage of the proceedings. I say that for a number of reasons.

42. First, for the reasons that I have given, whether or not the claim meets the requirements of the test stated in General Steel, in my opinion, it is weak.

43. Second, Vok has already been given ample time in which to formulate the claim that it wishes to bring. The proceedings were commenced in October 2012. The parties have filed evidence relevant to the issues as they originally stood. For a number of months, Vok was permitted to pursue a case that Diageo, in charging the prices it did, included a profit component despite the fact that there was very limited evidence to suggest that that was the case and despite the fact that, during the course of the agreement, it never sought to exercise its contractual right to obtain information on how the prices charged to it were calculated. During the time Vok pursued a claim that the Transfer Price included a profit component, it accepted that the express terms of the agreement meant what they said and sought to demonstrate that Diageo had not complied with them. It was only when Vok was confronted with evidence that Diageo had complied with the terms of the agreement that it sought to change its position. The proceedings have now been on foot for almost two years. I do not think that Vok should be permitted to reformulate its case again, which will involve further discovery and additional evidence, particularly given the problems with the reformulated case. Diageo is entitled to have the claim against it determined promptly; and to permit Vok to reformulate its case now would deny it that entitlement.

44. Third, and related to the second point, if Vok is permitted to reformulate its case, the likelihood is that it will be necessary for Vok to give substantial additional discovery. In particular, it will be necessary for Diageo to discover the material that demonstrates the costs of manufacture of a substantial number of products over the period of the Distribution Agreement. Vok submits that those costs will not be large because it is evident from Ms Szaszik's affidavit that Diageo has computerised records that record those costs. It is true that Diageo has not filed any evidence concerning the costs that it would incur in giving discovery. However, that in part can be explained by the fact that it is not clear precisely what documents it would be required to discover. In my opinion, the costs are likely to be substantial. Diageo will be required to search through detailed costing records going back a number of years relating to a substantial number of products manufactured by several companies in the group. It is not clear whether those records all continue to be held electronically and are readily retrievable. Nor is it clear that the costs that Vok says Diageo was entitled to include in the calculation of the Transfer Price can readily be separated from costs that Vok says Diageo was not entitled to include in that calculation. To take just one example, included in the costs that comprise the Transfer Costs are information technology (IT) costs. It is not clear on the evidence precisely what those costs relate to. Presumably, they include IT services that, among other things, track inventory and ordering, Diageo's payroll and inter-company purchase and sale of products. On Vok's case, the IT services that track the ordering of items used in the manufacturing process are recoverable, as well as services that track the payroll of employees directly involved in the manufacturing process. But what about other IT services? And what is to happen if there is a single payroll system for persons directly involved in the manufacturing process and persons employed in head office? Matters such as that will, on the case that Vok seeks to advance, need to be investigated. The likelihood is that Diageo will need to lead evidence concerning those matters. That will require a detailed investigation into the costs that are included in the Transfer Price, which is likely to be expensive and time consuming. In my opinion, it would not be reasonable to put Diageo to that expense having regard to the difficulties with Vok's case and the history of the proceedings. But unless Diageo is put to that expense, it is difficult to see how the case could be conducted.

45. Fourth, for the reasons I have given, if the amendments are allowed, that is likely to jeopardise the hearing date. It is true, as Mr Gyles submits, that the hearing date was fixed in circumstances where Vok's motion had been filed but not heard and that the date is expressed to be a provisional one. However, it can be inferred that the date was fixed because the case had been dragging on. It was fixed at a time when Vok was advancing an interpretation of the agreement that was relevantly uncontroversial. In my opinion, it would be inconsistent with the case management principles stated in s 57 of the Civil Procedure Act to allow an amendment which would jeopardise the hearing date, particularly given the length of time the proceedings have been on foot.

The amount charged for primary freight

46. The other amendment that Vok seeks to make is to allege that the amounts charged by Diageo for primary freight were excessive. Vok accepts that, in calculating the Transfer Price, Diageo was entitled to include a reasonable amount for the costs of transporting products from the factory to the place of first warehousing. It submits that Diageo, by charging excessive amounts for freight, was effectively earning a profit on that component of the Transfer Price, which ought to have been excluded.

47. I accept that it is at least arguable that, if Diageo charged an excessive amount for primary freight, it was earning a profit for the purpose of the definition of "Transfer Price".

48. However, I do not accept that, on the evidence, there is any factual basis for the allegation.

49. Vok relies entirely on a document attached to the affidavit of Ms Szaszik. The document consists of a table showing the freight charged to Vok in respect of various shipments. The table was attached to the affidavit because one line shows the freight charged for a particular shipment of J&B Rare Scotch Whisky 70cl 12x01 (SKU code 618001) that was invoiced to Vok on 30 January 2010. Ms Szaszik had taken that particular shipment as an example to explain how the Transfer Price was calculated. In an affidavit he swore, Mr Crichton, the Chief Financial Officer of Vok, has used that table to calculate the price per case for the financial years ending 2005 to 2013 using the same methodology that Ms Szaszik used in her example. He concludes that the prices per case were as follows:

FY2005: £0.40 per case

FY2006: £0.80 per case

FY2007: £0.84 per case

FY2008: £0.84 per case

FY2009: £0.84 per case

FY2010: £0.95 per case

FY2011: £1.0188 per case

FY2012: £1.0188 per case

FY2013: £0.53 per case

Vok invites the Court to infer that it is at least arguable that the price charged was excessive because it doubled from 2005 to 2006, continued to increase and then halved the year after the agreement was terminated. However, the table contains codes that are not explained. In some cases, the shipments are for different quantities (either 1, 100 or 900 units). In others, there are several shipments in the same year where, applying the calculation adopted by Mr Crichton, the prices were different. For example, there were shipments of 900 litres in FY2012 at £118.80 and £142.48 (producing a per case price of £1.1088 and £1.3298 respectively). The difference in price could be explained by differences in the means of transport or the quantity transported or changes in the source or destination of the product. Ms Szaszik does not explain the differences in price because that was not an issue at the time that she prepared her affidavit.

50. In my opinion, it is simply speculation on the part of Vok that the different prices demonstrate that the prices it was charged were excessive. It has been driven to that speculation because it became evident that the case it wanted to mount was not supported by the facts. In my opinion, the case that it seeks to advance is not supported by the facts on which it relies. It should not be permitted to seek discovery now to see whether such a case could be made out, particularly given the history of the matter.

Orders

51. It follows that Vok should not be permitted to file the proposed Commercial List Statement in its current form. Vok's application for discovery depends on those amendments. Consequently, Vok's further amended notice of motion filed on 15 July 2014 should be dismissed.

52. Vok has been unsuccessful. In those circumstances, there is no reason why it should not pay Diageo's costs, including Diageo's costs of the motion as originally filed and subsequently amended.

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