Winemakers fight Court of Appeal over 'daylight robbery' compensation ruling

04 May, 2007

Australian winemakers are taking legal action following a court decision in the UK that could cost them millions of dollars in compensation claims.

They are challenging a ruling that states that if they end an agreement with a UK wine company, they should pay goodwill reflecting the value of the business at the time of termination, regardless of whether it is related to the work of the agency or that of the wine company or brand itself.

The Winemakers' Federation of Australia has intervened in a case to be heard by the House of Lords in May in an attempt to overturn a decision by the English Court of Appeal, which its chief executive Stephen Strachan says puts at risk reasonable trading arrangements in the UK.

"Our wineries accept their obligations to their UK agents, including having to pay fair goodwill compensation on termination, as required by European law," explains Strachan. "But to expect Australian wineries to pay compensation based on pre-existing goodwill, or goodwill generated by the wineries themselves is, in our view, daylight robbery.

'"It amounts to an excessive, unfair and improper cost of exporting to the UK that the Australian wine sector does not face in any other export market. It may effectively bind our wineries to their agents, whether their performance is good, bad or indifferent.

"It's bad for Australian wineries, bad for competition, and bad for the thousands of UK consumers who love their Australian wines."

UK consumers drink more than 274 million litres of Australian wines annually.

The WFA has engaged UK solicitors APP Law and counsel Fergus Randolph and Victoria Wakefield to mount the intervention on its behalf. APP Law is a commercial law firm headed by solicitor Andrew Park, who specialises in UK wine agency, distribution and joint venture matters.

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