Last month we reported on the case of Fabcot Pty Ltd v Port Macquarie-Hastings Council [2010] NSWSC 726. If you missed the article, the case related to a decision by the Supreme Court that in certain circumstances, even if the parties haven’t expressly said that they are negotiating exclusively, a court may decide that they are. On the facts of that particular case, the judge did not award Fabcot (Woolworths) damages as it was unable to show that it suffered any loss or damage. Woolworths appealed this decision.
We will spare you the details of the appeal findings (if you are interested in the details, click here to get the full judgement) but in summary, the court dismissed the appeal by agreeing with the primary judge’s on the issue of damages. However, they also made it clear that, in contrast to the findings of the primary judge, they were not of the view that Woolworths could claim that it had a period of exclusivity in these circumstances without an express agreement otherwise. And therefore that Woolworths could not claim that the council had engaged in misleading and deceptive conduct.
Notwithstanding the result of the appeal, we were most interested in the comments of Sackville AJA that “… there might be circumstances in which an expectation of that kind, at least for a period, might be created even without an express exclusivity agreement” (our emphasis added).
So although in this case the evidence did not establish that there was the expectation of exclusivity that could be relied upon by Woolworths, the court was still opening the door to the suggestion that there could in fact be instances where exclusivity may be implied even without an express exclusivity agreement.
So what can you do to make sure you aren’t in the situation where a contracting party claims that you are under an obligation to exclusively negotiate with them?
1. There are now circumstances where an expectation of exclusivity, at least for a period, might be reasonable, even in the absence of an exclusivity agreement.
2. Be clear in your dealings – don’t say things that could lead to the impression that you intend to deal with only 1 supplier.
3. Exercise restraint in making any representations at all as to how you intend to conduct a process, if indeed you might change your mind – if you start having conversations, even if you declare them to be “off the record”, about how you are going to conduct a process and you subsequently change that process, you are only inviting issues.
