Skelton v Z487 Limited [2014] NZHC 707 (8 April 2014)

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BETWEEN	DONALD ALFRED SKELTON Plaintiff
AND	Z487 LIMITED First Defendant JOHN DAVID BLACKLER Second Defendant

Hearing:	26 March 2014
Appearances:	C Elliott QC and S Hood for plaintiff J MacGillivray and S Jass for first defendant No appearance for second defendant (abides decision of Court)
_Judgment:	_{8 April 2014}

This judgment was delivered by me on 8 April 2014 at 4 pm, pursuant to Rule 11.5 of the High Court Rules.

[1] The plaintiff, Mr Skelton, is a horticulturist who has bred numerous different varieties of kiwifruit over many years. Mr Skelton breeds his kiwifruit cultivars at a rural property near Huntly, in the Waikato.

[2] Mr Skelton has acquired plant variety rights (“PVR’s”) in respect of many of the varieties of kiwifruit that he has developed. These give him the sole right to market and commercialise those varieties. Mr Skelton does not, however, market his cultivars himself. Instead, he enters into licence agreements with third parties, both in New Zealand and overseas. Under these, Mr Skelton authorises the licensee to market and commercialise specified varieties of kiwifruit in respect of which Mr Skelton holds PVR’s (“licensed cultivars”). The licence agreement entitles the licensee to enter into agreements with sub-licensees giving the sub-licensee the right to market and distribute plants and fruit from the licensed cultivars within a specified territory.

[3] The licence agreement, which lasts for thirty years, prescribes the minimum and maximum number of hectares that the licensee may plant in licensed cultivars during the term of the agreement. The agreement also provides that Mr Skelton and the licensee (and in some cases the sub-licensee) will share in specified proportions any production and propagation royalties received in respect of those plants.

[4] In or about 2005, Mr Skelton entered into an arrangement under which he authorised an Australian company, Global Plants IP (“Global Plants”) to commercialise and distribute certain kiwifruit cultivars. The controlling force behind Global Plants was Mr Colin Lye, who is an agronomist. Mr Lye lives and operates his business in Queensland, Australia.

[5] In 2008 Mr Lye incorporated the defendant, Z487 Limited (“Z487”) in New Zealand. Z487 subsequently entered into a new licence agreement with Mr Skelton under which it received the right to market and commercialise 24 specified varieties of kiwifruit throughout the world (“the 2008 agreement”). In 2010, Mr Skelton and the second defendant, Mr Blackler, entered into a further agreement under which they gave Z487 a licence to market and commercialise six further varieties of

kiwifruit in North and South America, Australia, New Zealand, Africa, the Middle

East, Turkey, Asia and the countries of the European Union (“the 2010 agreement”).

[6] During the latter part of 2013, Mr Skelton came to the view that Z487 was in breach of several terms of both agreements. He then gave notice to Z487 requiring it to remedy the breaches. When it failed to do so, he purported to terminate the 2008 agreement on 6 November 2013. On 11 December 2013, he and Mr Blackler then purported to terminate the 2010 agreement. Mr Blackler subsequently purported to revoke his consent to the termination of the 2010 agreement on 17 December 2013.

[7] Mr Lye does not accept that Mr Skelton has validly terminated either agreement. In January 2014, he issued a proceeding in the Supreme Court of Queensland seeking a declaration that Mr Skelton has not validly terminated the

2008 agreement (‘the Queensland proceeding”). Mr Skelton has applied for an order staying the Queensland proceeding on the basis that this Court is the most appropriate forum within which to determine the issues raised in that proceeding. The Supreme Court of Queensland is scheduled to hear Mr Skelton’s application on

11 April 2014. Z487 proposes to amend its claim in the Queensland proceeding so as to ask the Supreme Court of Queensland to determine the validity of the termination of both agreements.

[8] Mr Skelton issued the present proceeding on 28 February 2014. He seeks a declaration that he validly terminated both agreements, together with a permanent injunction restraining Z487 from dealing with any of the licensed cultivars that are the subject of the two agreements. He also seeks an injunction restraining Z487 and Mr Lye from holding themselves out as continuing to act as Mr Skelton’s licensee. Mr Skelton also seeks damages in respect of the alleged breaches of contract that led to the termination of the agreements.

[9] Mr Skelton initially applied for an interim injunction preventing Z487 and Mr Lye from continuing to act as if the two agreements were still on foot. The objective of that application appears to have been to stop Mr Lye from continuing to deal with Z487’s sub-licensees.

[10] The application for an interim injunction came before me on 6 March 2014. During the hearing, it quickly became evident that the Court needed to determine whether the issues raised in the present proceeding should properly be determined by this Court or in the Queensland proceeding. Counsel agreed that the best way to deal with this issue was for Z487 to apply for a stay of the present proceeding on the basis that the Supreme Court of Queensland was the most appropriate forum within which to have the overall dispute determined.

[11] Z487 has now filed that application, and Mr Skelton has filed documents in opposition to it. As a result, I am now required to determine whether to grant the stay that Z487 seeks.

[12] One of the purposes of the Trans-Tasman Proceedings Act 2010 (“the Act”) is to streamline the process resolving civil proceedings having “a trans-Tasman element” in order to reduce costs and improve efficiency.¹Both counsel agree that, although Z487 is a New Zealand company, the circumstances surrounding this proceeding mean that the dispute has the necessary trans-Tasman element to bring the Act into play.

[13] In Australia, the Act is mirrored by the Trans-Tasman Proceedings Act 2010 (Cth). It is therefore likely that the Supreme Court of Queensland will need to determine Mr Skelton’s application for stay of the Queensland proceeding in accordance with that Act.

[14] Section 22 of the Act permits a defendant in a civil proceeding commenced in a New Zealand court to apply to that court for an order staying the proceeding on the ground that an Australian court is the more appropriate court for the proceeding. Z487 relies on s 22 in advancing the present application.

[15] Section 24 of the Act provides the Court with jurisdiction to make an order staying a proceeding in certain circumstances. It provides as follows:

(1) On an application under section 22, the New Zealand court may, by order, stay the proceeding if it is satisfied that an Australian court—

(a) has jurisdiction to determine the matters in issue between the parties to the proceeding; and

(2) In determining whether an Australian court is the more appropriate court to determine the matters in issue between the parties to the proceeding, the New Zealand court must not take into account the fact that the proceeding was commenced in New Zealand, but must take into account the following matters:

(a) the places of residence of the parties or, if a party is not an individual, its principal place of business:

(b) the places of residence of the witnesses likely to be called in the proceeding:

(c) the place where the subject matter of the proceeding is situated: (d) any agreement between the parties about the court or place in

should be instituted (other than an exclusive choice of court agreement to which section 25(1) applies):

(f) whether a related or similar proceeding has been commenced against the defendant or another person in a court in Australia:

[16] Also relevant for present purposes is s 25. Section 25 relates to a contract where the parties have provided for an exclusive choice of Court. Section 25 provides as follows:

(a) must, by order, stay the proceeding, if satisfied that an exclusive choice of court agreement designates an Australian court as the

court to determine the matters in issue between the parties to the proceeding; and

(b) must not, by order, stay the proceeding, if satisfied that an exclusive choice of court agreement designates a New Zealand court as the court to determine those matters.

(2) However, subsection (1)(a) does not apply to an exclusive choice of court agreement if the New Zealand court is satisfied that—

(a) it is null and void under the law (including, without limitation, the rules of private international law) of Australia; or

(c) giving effect to it would lead to a manifest injustice or would be manifestly contrary to New Zealand public policy; or

(d) for exceptional reasons beyond the control of the parties to it, it cannot reasonably be performed; or

(e) the court designated by it as the court to determine the matters in issue between the parties to the proceeding has decided not to determine those matters.

(3) However, subsection (1)(b) does not apply to an exclusive choice of court agreement if the New Zealand court is satisfied that it is null and void under the law (including, without limitation, the rules of private international law) of New Zealand.

(4) Exclusive choice of court agreement, in relation to matters in issue between parties to a proceeding, means a written agreement between those parties that—

(a) designates the courts, or a specified court or courts, of a specified country, to the exclusion of any other courts, as the court or courts to determine disputes between those parties that are or include those matters; and

(b) is not an agreement the parties to which are or include 1 or more individuals acting primarily for personal, family, or household purposes; and

[17] Mr Skelton and Z487 are now both in an extremely difficult position. Each is a defendant in a proceeding issued in another country. One of the principal issues to be determined in both proceedings will be the validity of the termination of one or

both agreements. Should the present state of affairs continue, Mr Skelton and Z487 will inevitably be put to considerable needless expense and inconvenience because of the duplication of effort inherent in having that issue determined in two separate sets of proceedings in two different countries.

[18] Both parties agree that it would be highly desirable for all matters in issue to be finally determined by one Court. They are conscious that concurrent proceedings in different jurisdictions will create the risk of inconsistent decisions and the consequential problems that this will cause. The courts in England, who presumably face this issue on a reasonably regular basis, have described such an outcome as

being a “potential disaster from a legal point of view.”²Understandably, however,

Mr Skelton and Z487 cannot agree as to which court should be tasked with determining their dispute.

[19] Two factors require the Court to take an extremely pragmatic approach to the present application. The first is that the Court should endeavour to give effect to the purpose of the Act. Any order that it makes should reflect the Act’s stated purpose of reducing costs and improving efficiency for the parties. That purpose would plainly not be achieved by permitting two sets of proceedings to continue in tandem in different countries.

[20] Secondly, the validity of the termination of the agreements needs to be determined urgently. Mr Skelton and Z487 obviously need to know where they stand as soon as possible. Z487’s sub-licensees are also understandably in a state of significant uncertainty as to whether they should continue to deal with Mr Lye and Z487 or with Mr Skelton. Mr Skelton has apparently contacted some of Z487’s sub- licensees directly, and has told them that they should no longer deal with Mr Lye and Z487. Mr Lye, on the other hand, takes the view that Z487’s sub-licensees have no right to deal with Mr Skelton.

[21] Furthermore, the issues to be determined in both proceedings are extremely important to both parties. They have each invested very considerable time, effort

²Aratra Potato Co Ltd v Egyptian Navigation Co [1981] 2 Lloyd’s Rep 119 (CA) (the El Amria)

and expense over the last nine years in developing their respective businesses. It is therefore essential that the courts in both jurisdictions endeavour to give effect to the parties’ desire to have their dispute resolved in a timely manner by a single Court.

[22] A complicating factor in the present case arises out of the fact that the 2008 and 2010 agreements both contain provisions falling within the definition of an “exclusive choice of court agreement” for the purposes of s 25 of the Act. The 2008 agreement provides that the agreement shall be governed by, and construed in accordance with, the laws of Australia and, where applicable, the laws of Queensland. The agreement also provided that the parties to that agreement acknowledged and agreed that any disputes arising out of that agreement were to be determined exclusively by the Federal Court of Australia, the District Court of Queensland or the Supreme Court of Queensland.

[23] The 2010 agreement, on the other hand, provided that the agreement was to be governed by, and construed in accordance with, the laws of New Zealand. The parties to that agreement also acknowledged and agreed that the courts of New Zealand were to be the sole venue and exclusive forum in which to adjudicate any such disputes. The existence of this clause no doubt explains why Z487 has only filed the Queensland proceeding in respect of the disputed termination of the 2008 agreement.

[24] It is necessary to deal with this issue first, because the terms of s 25 are mandatory. The only circumstances in which the Court will be entitled not to give effect to clauses such is these are set out in s 25(2). Z487 does not contend that any of these exist in relation to the 2010 agreement. As a result, s 25(1)(b) prohibits the Court from directing a stay of the present proceeding to the extent that it deals with disputes arising out of the 2010 agreement.

[25] Using the same reasoning, counsel for Z487 argues that the Court is required to stay the proceeding to the extent that it deals with disputes arising out of the 2008 agreement. He submits that the courts in Queensland have exclusive jurisdiction in respect of those disputes. The end result, therefore, would be that the courts in New

Zealand would deal with one aspect of the dispute, whilst the courts in Queensland would deal with the other. That is precisely the outcome that neither party desires, and that the Act seeks to prevent.

Would it be manifestly unjust to give effect to the exclusive jurisdiction clause in the 2008 agreement?

[26] Counsel for Mr Skelton contends that a manifest injustice will result if the Court gives effect to the exclusive jurisdiction clause in the 2008 agreement. He alleges that his health problems will physically prevent him from being able to attend any hearing that might be held in Australia.

[27] Mr Skelton suffers from significant health problems. His bowel was removed some time ago, and this means that he must watch his diet carefully. He also has heart disease that requires regular medical management. In addition, Mr Skelton suffers from diabetes. This also requires stability of diet and regular monitoring. Mr Skelton says that these issues mean that he has not been overseas since 1988, and that he would not be able to travel to Queensland to sit through a lengthy trial.

[28] Z487 takes issue with Mr Skelton on this point. Mr Lye says that Mr Skelton travels regularly by car throughout the North Island, and that there is no reason why he could not travel to Brisbane for a hearing.

[29] Neither counsel explored what is meant by the term “manifestly unjust” in s

25, although they advised me that this is the first occasion on which a court in New

[30] It is likely, in my view, that the meaning to be attributed to the phrase will be informed by the background against which the Act came to be passed.³For present purposes, however, I do not need to embark upon that enquiry. I am satisfied that the evidence does not establish that Mr Skelton could not travel to Queensland if that was necessary. The medical certificate that Mr Skelton has produced does not say

_{that he is unfit to travel to Australia. It says only that “with
[Mr Skelton’s] health}

³Section 25 appears to be modelled on arts 5 and 6 of the Hague Choice of Courts Convention.

Authorities relating to the manner in which those articles have been interpreted are therefore likely to be relevant to the manner in which s 25(2) should be interpreted.

limitations to travel and function in an unfamiliar, hot environment with changes to his diet, he would be substantially disadvantaged in presenting his case.” I consider that Mr Skelton would be able to travel to Brisbane if necessary, and that he ought to be able to manage his dietary issues and exposure to the heat whilst there (assuming the case is heard during hot weather) in a way that does not jeopardise his long term health. If he does not wish to travel to Australia he could no doubt give his evidence by way of audiovisual link. For that reason I find that it would not result in manifest injustice if the exclusive jurisdiction clause in the 2008 agreement was given effect.

[31] It follows that s 25(1)(a) requires the Court to stay the present proceeding to the extent that it seeks to obtain a declaration as to the validity of the termination of the 2008 agreement. Furthermore, it must also stay the proceeding to the extent that it seeks damages in respect of alleged breaches of the 2008 agreement. On the other hand, s 25(1)(b) prohibits the Court from staying the proceeding to the extent that it deals with disputes arising out of the 2010 agreement. This produces the result that neither party wants. It means that the dispute will necessarily be determined in a piecemeal way in both Australia and New Zealand.

[32] It is open, however, to the courts in Queensland to elect not to determine the issues raised in the Queensland proceeding. Should they take that step, s 25(2)(e) will permit the courts in New Zealand to determine all matters in dispute notwithstanding the exclusive jurisdiction clause in the 2008 agreement. For that reason I propose to consider whether, having regard to the factors set out in s 24(2), an Australian court is the more appropriate court to determine the matters in issue in respect of the 2008 agreement. Analysis of these factors will assist in producing the outcome that most accords with the purposes of the Act.

[33] Mr Skelton lives in New Zealand and operates his business both here and overseas. Although Z487 has its registered office in New Zealand, it operates its business from Queensland. Section 24(2)(a) provides that where a party is not an individual, the principal place where it carries on business is the relevant factor

rather than the location of its registered office. I regard therefore this as a relatively neutral factor.

[34] The validity of the termination of the two agreements is obviously the most pressing issue to be determined. Subject to hearing further from counsel, I would therefore envisage that the dispute may most conveniently be determined in two phases, with the first phase focussing on that core issue. Resolution of the remaining issues, such as any consequential orders or claims for damages that either party might have against the other, could then be determined if necessary at a second trial.

[35] I would envisage that the first phase would therefore be the trial of a preliminary issue under r 10.15 of the New Zealand High Court Rules or its Australian equivalent. Given the limited ambit of that trial, the number of witnesses that each party calls may be less than they presently envisage.

[36] Mr Skelton will obviously be a witness, and for reasons I have already traversed it would be far easier for him to give evidence in New Zealand rather than in Queensland. He says he proposes to call up to seven witnesses who live in New Zealand. It would obviously be more inconvenient for those witnesses to be required to give evidence in Queensland, although the time taken to travel from Auckland, Wellington or Christchurch to Brisbane would not vary greatly from that taken to travel to Hamilton from many centres in New Zealand.

[37] Mr Lye will also obviously need to give evidence at trial, but the evidence presently before the Court indicates that he has travelled to New Zealand on a fairly regular basis in the past. He does not suggest that being required to travel to New Zealand for the trial would amount to an unduly onerous burden.

[38] Mr Lye also says that he intends to call at least four witnesses who live in Australia. Again, that number may reduce if the initial trial is concerned only with the validity of the termination of the two agreements. One of Mr Lye’s witnesses lives in Queensland, a second lives in Perth and he does not disclose the place of

residence of the other two witnesses. Obviously these persons would be inconvenienced by having to come to New Zealand to give evidence.

[39] Both parties also say that they may call further witnesses who live in countries other than Australia and New Zealand. Those witnesses will obviously be required to travel to give their evidence regardless of where the trial is held.

[40] I consider that the difficulties Mr Skelton will undoubtedly face if he is required to travel to Australia, together with the greater number of witnesses he proposes to call, tip the scales under this head slightly in favour of the case being heard in New Zealand rather than in Queensland.

[41] Factors favouring New Zealand as the venue for the trial under this head include the fact that Mr Skelton and Mr Lye negotiated and signed the two agreements in New Zealand. The strains of kiwifruit that form the subject matter of both agreements were also developed in this country. Furthermore, one of the breaches that led to Mr Skelton purporting to terminate the agreements was an alleged failure by Z487 to pay outstanding royalties to him. Such payments would presumably have been made into Mr Skelton’s bank accounts in New Zealand.

[42] On the other hand, most of the alleged breaches are based on Mr Lye’s conduct whilst conducting Z487’s business in and from Australia. Examples include allegations that Mr Lye distributed plants to unlicensed persons, and into countries where there are no PVR protections in place. He is also alleged to have submitted a PVR application to the South African Government in which he falsely stated that he was one of the owners of the kiwifruit variety in respect of which the PVR was sought. Virtually all of the conduct that will be the subject of scrutiny at trial therefore occurred in or from Australia. This arguably provides the case with a distinctly Australian flavour, and suggests that Queensland is a more appropriate venue. Having said that, it is likely that many of the alleged breaches will have occurred as a result of electronic communications sent to or by Mr Lye. That type of conduct can be readily scrutinised by a court outside the country where the communications were sent or received.

[43] For that reason I conclude that this factor favours the dispute being determined in Queensland, but not by a large margin.

[45] Mr Skelton has suggested that the circumstances surrounding his execution of the 2008 agreement might provide an argument that the law of Australia was not to apply in relation to that agreement.⁴Thus, depending on the legal issues that the purported termination raises, the first phase may also require the court to determine whether the law of New Zealand or Australia is to apply in respect of the 2008 agreement. Where the law of the two countries in respect of an issue differs materially, the court will need to determine whether Mr Skelton signed the 2008 agreement in the mistaken belief that it contained a clause providing that the

agreement was to be interpreted and construed in accordance with New Zealand law. If he did, the court would need to consider whether to grant relief. In New Zealand, that could be done under the provisions of the Contractual Mistakes Act 1977. In Australia, it would need to be done either under the common law or in accordance with any Australian counterpart to that Act. Either way, however, it would not be a difficult matter for a New Zealand court to apply Australian law or for a court in Australia to apply New Zealand law. I therefore regard this factor as being relatively neutral.

[46] The Queensland proceeding is obviously a related proceeding, because it involves Mr Skelton and Z487. It also raises some of the issues that the court will be required to determine in the present proceeding.

[47] Z487 issued the Queensland proceeding on 10 January 2014. The Queensland proceeding therefore pre-dates the present proceeding by approximately six weeks, a point that counsel for Z487 submits is highly relevant. He submits that

Mr Skelton issued the present proceeding knowing that the Queensland proceeding was already in existence, and knowing also that it dealt with many of the same issues that he raises in the present proceeding. Counsel for Z487 contends that this strongly tips the scales in favour of Queensland as being the appropriate venue for the trial.

[48] There is some merit in this argument, but it needs to be remembered that at present the Queensland proceeding deals only with the purported termination of the

2008 agreement. The Queensland proceeding cannot deal with issues arising out of the 2010 agreement unless it permits Z487 to amend its claim so as to include the purported termination of that agreement. For that reason I do not consider Mr Skelton can be blamed for filing the present proceeding, in which he asks the Court to determine the validity of the termination of both agreements. The fact that the present proceeding already deals with that issue therefore puts it slightly ahead of the Queensland proceeding in that regard.

[49] The Queensland proceeding has an added dimension, however, that will never form part of the present proceeding. This arises out of the fact that on 19

January 2014, the Supreme Court of Queensland made an order joining one of Z487’s sub-licensees as a party to the Queensland proceeding. It did so because, as I understand the position, Mr Lye takes issue with the manner in which Mr Skelton approached and attempted to deal directly with that sub-licensee. Mr Lye says that all of the sub-licence agreements that Z487 enters into contain a provision nominating the courts in Australia as being the non-exclusive fora for determination of disputes arising out of the arrangement. As a result, it is likely that the dispute between Z487 and the sub-licensee will need to be determined in Australia.

[50] I accept the strength of this argument. The fact that third parties will be affected by a proceeding is a matter that can be taken into account when considering the appropriate forum within which a dispute should be determined.⁵Although the agreement between Z487 and its sub-licensee does not provide that the courts in Australia shall have exclusive jurisdiction to resolve disputes between the parties, there could be no justification for requiring Z487 and its sub-licensee to have their

between Z487 and its sub-licensee will turn in large part on the validity of the purported termination of the 2008 and 2010 agreements by Mr Skelton.

[51] The courts in Australia could obviously determine the dispute between Z487 and its sub-licensee once the outcome of the first phase was known even if that was determined by the courts in New Zealand. That may not, however, promote the Act’s objective of promoting cost effective Trans Tasman litigation, because it would require Z487 to conduct related litigation in the courts of two different countries. In addition, it would require both Z487 and the sub-licensee to accept the decision of the New Zealand courts in relation to the validity of the termination. If that decision was in Mr Skelton’s favour, however, Z487’s claim against its sub-licensee would presumably fall away. There is therefore at least the prospect that the claim against the sub-licensee may never need to be heard. With that caveat, I accept that this factor supports all of the claims being heard and determined by the courts in Australia.

[52] Neither party has provided any details of their financial situation. For that reason this factor cannot be given a great deal of weight. Mr Skelton says, however, that he does not want to be drawn into protracted litigation in Australia because he does not have the financial resources to commit to such a campaign. If that should occur, he says he would run out of money. Mr Lye does not say that he would be financially embarrassed if the dispute was to be determined in either country.

[53] To date Mr Skelton has clearly had sufficient financial resources to meet the costs of opposing Z487’s application seeking an order joining the sub-licensee as a defendant in the Queensland proceeding. He has also evidently been able to fund his application for an order staying the Queensland proceeding. For present purposes, therefore, I regard this as a neutral factor.

Determination of the validity of the termination of the 2010 agreement includes consideration of breaches of 2008 agreement

[55] The 2010 agreement contains a provision⁶stating that an event of default by the licensee will occur where the licensee fails to perform “any of the Licensee’s obligations under any other agreement between the Owner and the Licensee”. Mr Skelton contends that this provision entitles him to rely on alleged breaches by Z487 of the 2008 agreement as grounds justifying termination of the 2010 agreement.

[56] Counsel for Z487 contends that Mr Skelton cannot rely on this provision, because the persons named as the “Owner” in each agreement are different. The “Owner” under the 2008 agreement is Mr Skelton, whereas the “Owner” under the

[57] It needs to be remembered, however, that under the 2010 agreement Mr Skelton and Mr Blackler granted Z487 a licence to commercialise and market kiwifruit cultivars that each had developed. Mr Skelton and Mr Blackler did not own any of those cultivars jointly. It can therefore be argued that the 2010 agreement imposed obligations on Z487 that Mr Skelton and Mr Blackler are severally entitled to enforce. In other words, Mr Skelton can enforce those obligations in the 2010 agreement that relate to the cultivars he had developed, whilst Mr Blackler can enforce obligations relating to cultivars he had developed. The 2010 agreement also imposes other more general obligations on Z487 that it owed to both Mr Skelton and Mr Blackler. Arguably, however, it owes such obligations to both men on a joint and several basis.

[58] For these reasons I do not accept Z487’s argument on this point. I consider it is at least arguable that the courts of New Zealand have jurisdiction to consider whether breaches by Z487 of the 2008 agreement also constituted breaches of the

2010 agreement. As a result, I consider that all of the issues in dispute in relation to both agreements are already effectively before the Court in the present proceeding notwithstanding the exclusive jurisdiction clause in the 2008 agreement. At present, however, breaches of the 2008 agreement will only be relevant to the issue of

[59] Mr Skelton maintains that he never intended the 2008 agreement to contain a clause giving Australian courts exclusive jurisdiction in relation to disputes arising out of that agreement. He says that his inability to travel overseas has meant that he has always been at pains to ensure that the law and courts of New Zealand were to be used to determine any disputes arising out of licence agreements. He points to several factors in support of his assertion that he was not aware that the 2008 agreement contained the exclusive jurisdiction clause providing the Australian courts with exclusive jurisdiction to determine disputes arising out of the agreement.

[60] First, Mr Skelton points to the fact that the agreement he signed with Global Plants in 2005 contained a provision to the effect that the agreement was to be construed and interpreted in accordance with the laws of New Zealand. I accept that that was the case, but Mr Lye contends that two separate agreements recorded the

2005 arrangement between Mr Skelton and Global Plants. The agreement that Mr Skelton relies upon governed the licence arrangement in respect of Australia and New Zealand. A separate agreement governed the licence arrangement that applied outside those countries. This agreement contained a clause providing that the agreement was to be construed and interpreted in accordance with the laws of Australia. The agreement also contained an exclusive jurisdiction clause, but the space where the courts that were to have exclusive jurisdiction were to be named was left blank.

[61] Mr Skelton is unable to recall the second agreement even though he appears to have signed it. Given that state of affairs, I consider that the 2005 arrangement is a neutral factor for present purposes.

[62] Next, Mr Skelton says that the negotiations leading up to the signing of the

2008 agreement led to Mr Lye preparing several draft agreements for his consideration. He says that in May 2007 Mr Lye sent him a draft that omitted the clause providing that the agreement was to be interpreted and construed in accordance with the laws of New Zealand. The draft also contained other provisions

that he was not happy with. Mr Skelton says that he advised Mr Lye of his concerns, and Mr Lye said that he would amend the draft to deal with them.

[63] Mr Skelton says that he subsequently received and rejected several further drafts. Importantly, however, he says that on 8 December 2008 Mr Lye sent him a draft containing a clause providing that the agreement was to be interpreted and construed in accordance with the laws of New Zealand. It also contained a clause providing that the courts in New Zealand were to have exclusive jurisdiction to determine any disputes arising out of the agreement. He was still not happy with other aspects of the agreement, however, and says that he advised Mr Lye of these concerns. He also sent Mr Lye an email on the same day containing a set of conditions that he wanted inserted in the new agreement. These included the same provisions regarding law and forum that were contained in the draft he had received earlier that day from Mr Lye.

[64] Mr Skelton says that matters then stalled until April 2009, when Mr Lye sent him another draft agreement. This, too, contained clauses providing that New Zealand law was to apply and that the courts of New Zealand were to determine any disputes arising out of the agreement. The agreement still contained several provisions that Mr Skelton was not happy with, however, so he did not sign it.

2009, and showed him a further draft agreement. He says that Mr Lye was in a hurry, and wanted him to sign the agreement quickly. Mr Skelton says that he checked the document to ensure that Mr Lye had made the changes he had requested in April 2009. He saw that the changes had been made, and then signed the agreement. He did not check to see that the agreement still contained the provisions relating to the applicable law and forum for determining disputes. He did not think that was necessary given the fact that earlier drafts had all contained the clause providing for the law of New Zealand to apply to the agreement and for the courts of New Zealand to determine disputes.

[66] Mr Skelton maintains that he had no idea until recently that the 2008 agreement contained the clauses relating to law and forum. He points to the fact that

the 2010 agreement does not contain those clauses. Rather, it provides for the agreement to be interpreted and construed in accordance with New Zealand law. It also provides for disputes to be determined by the courts in New Zealand. For that reason he intends to amend his claim in this proceeding to include an application for an order rectifying the 2008 agreement so that it aligns with the 2010 agreement in this respect.

[67] If this was the only evidence on the topic, it would provide compelling support for Mr Skelton’s assertion that Mr Lye inserted the exclusive jurisdiction clause in the 2008 agreement by subterfuge and without his knowledge.

[68] There is, however, another side to the story. Mr Lye does not accept that he or his solicitor prepared the documents upon which Mr Skelton relies. His counsel points out that there is nothing to support Mr Skelton’s assertion that Mr Lye sent the documents to him as drafts. Mr Lye also points out, and his Australian solicitor confirms, that on 8 December 2008 Mr Lye’s solicitor sent a draft agreement to Mr Lye by email. Mr Lye then forwarded the draft on to Mr Skelton by email. That document did not contain the clauses relating to New Zealand law and forum. Rather, it contained clauses in the same form as those that were ultimately contained in the 2008 agreement.

[69] Counsel for Z487 also points out that the documents upon which Mr Skelton relies contain some unusual features. By way of example, the draft agreement that Mr Skelton alleges he sent to Mr Lye on 8 December 2008 is dated 22 December

2008. In addition, it was evidently not sent as an attachment but rather as a scanned document. He submits that the Court will therefore need to look closely at the documents on which Mr Skelton relies, and that it should be cautious about accepting them at face value.

[70] It is obviously impossible to reach any firm conclusion regarding these issues on the present state of the evidence. Nevertheless, I consider I am entitled to give considerable weight to the fact that there is no dispute that the parties agreed that the

2010 agreement was to be construed and interpreted in accordance with the laws of

New Zealand, and that the courts of New Zealand were to have exclusive jurisdiction

in respect of disputes arising out of that agreement. There is no evidence that Mr Skelton and Mr Lye discussed this issue when they negotiated the terms of the 2010 agreement. One could reasonably expect such a significant change to be the subject of considerable discussion and negotiation, particularly by Mr Lye and Z487. The fact that this appears not to have occurred lends considerable weight to Mr Skelton’s argument that he has always proceeded on the mistaken basis that any disputes under both agreements were to be determined in New Zealand.

[71] I consider that the existence of a significant dispute as to whether the parties intended the courts in Australia to have exclusive jurisdiction in respect of the 2008 agreement is a matter that favours the overall dispute being determined in New Zealand.

[72] The only other matter I consider to be relevant to the present application is that of timing. It is essential that the first phase of the dispute is determined quickly, so that the parties and Z487’s sub-licensees know where they stand regarding the validity of the termination. I agree with counsel for Mr Skelton that it would be highly unfortunate if the parties were to be drawn into protracted interlocutory skirmishing that resulted in a significant delay in determining the substantive dispute. It would also be unfortunate if the courts in either jurisdiction could not allocate an early trial date.

[73] The position in New Zealand is that the parties could have a fixture as soon as they are ready. In all likelihood they will need to engage in tailored discovery of documents relevant to the issue to be determined in the first phase. Thereafter, however, they could proceed directly to trial in relation to that issue.

[74] There is no evidence as to when a firm fixture might be available in Queensland. To date, however, the Supreme Court of Queensland has dealt with interlocutory matters very quickly. There is no reason to believe that it would not be able to provide an early substantive fixture once the parties have completed discovery. For that reason I treat this as a neutral factor at this stage.

[75] In the end, the decision is finely balanced. The factors telling most strongly in favour of Queensland as the venue for the proceeding are the existence of Z487’s claim against the sub-licensee in the Queensland proceeding, and the fact that most of the alleged conduct that led to termination occurred in or from Australia.

[76] Factors pointing towards New Zealand as the most appropriate venue include the fact that more witnesses are likely to be called from New Zealand than Australia, and the fact that Mr Skelton’s health issues will place him at a substantial disadvantage if the dispute is determined in Australia.

[77] I have concluded that two factors tip the balance in favour of the courts of New Zealand being the more appropriate forum within which to resolve the overall dispute. The first is the uncertainty presently surrounding the execution of the 2008 agreement. The second is that the courts in New Zealand already have the ability to determine whether breaches of the 2008 agreement justified Mr Skelton terminating the 2010 agreement. If the courts in New Zealand already have that ability, it makes sense that they should also be permitted to determine whether the same factors also entitled Mr Skelton to terminate the 2008 agreement. The evidential enquiry into both issues will be the same. It would make little sense for the courts in New Zealand to undertake the exercise in relation to the 2010 agreement, and for the courts in Australia to duplicate that exercise in relation to the 2008 agreement. That would not be cost effective, and it would also lead to the risk of inconsistent decisions.

[78] I have therefore concluded that the present proceeding provides the parties with a more convenient and cost effective vehicle for resolving all of their disputes than does the Queensland proceeding.

[79] A present, s 25(1)(a) of the Act prevents me from assuming jurisdiction in relation to the 2008 agreement. However, an analysis of the s 24(2) factors favours the whole dispute being resolved in New Zealand. For that reason, I do not propose

to do more at this stage than signal my preliminary conclusion. It will obviously be for the Supreme Court of Queensland to reach its own conclusion as to what orders, if any, it should make in relation to Mr Skelton’s application for stay of the Queensland proceeding. I also recognise that it is possible that issues arising in the context of that application may require me to revisit my present conclusion.

[80] Counsel for Mr Skelton should therefore file a memorandum attaching a copy of the decision determining Mr Skelton’s application for stay of the Queensland proceeding as soon as it is to hand. I will then convene a conference with counsel to determine the best way forward from there.

[81] The proceeding is to be nominally listed for mention in the Chambers List at Hamilton on 26 June 2014 at 9 am. If the decision of the Queensland Supreme Court has not been delivered prior to that date, counsel should file a joint memorandum to that effect. The proceeding will then be further adjourned to await delivery of that

High Court of New Zealand Decisions

Skelton v Z487 Limited [2014] NZHC 707 (8 April 2014)