Icon Brewing has been in the Supreme Court of New South Wales again this week, arguing it is owed $1.74 million by its former packaging partner Boka Beverages.
The contractual dispute was heard on November 21 and 22 and is separate to the argument over possession of the brewery, which Brews News revealed in October.
The Originating Process for this week’s stoush was lodged by Icon in April, after Boka allegedly issued Icon with a statutory demand stipulating the contract brewer owed $939,248.87 in outstanding fees.
Icon has asked the court to set aside this statutory demand and has presented evidence alleging that Boka Beverages in fact owes Icon $1,735,708.28.
Per case fee
In June 2014, Icon agreed it would pay Boka $3.50 per case for the first 250,000 cases per annum packaged at the Prestons facility, according to the Originating Process signed by Icon founder Hanna ‘John’ Melhem.
The fee dropped to $3 per case for the next 250,000 cases and $2.75 for anything packaged beyond 500,000 cases, Melhem says.
“Annual individual customer runs of 40,000 cases or more was [sic] at a price to be negotiated and not subject to the rates,” the document says.
“Icon’s customers of Young Henry’s and Murrays [sic] both produced more than 40,000 cases annually.”
Fee increase rejected
Melhem says Boka Beverages issued invoices based on the rates set out in the agreement between June 2014 and February 2015.
“The first purported communicated increase of rates occurred on or about 27 February 2015… the increases in rates were outside the terms of the agreement and without the consent of Icon,” he says.
“Since March 2015, [Boka] Beverages have charged Icon Rates that have varied between production runs.
“For example, in May 2016, [Boka] Beverages charged a packaging rate of $4.80 for one of Icon’s customers but then it charged $8.40 for another of Icon’s customers.”
He says Icon rejected the rate increase and from March 2015 onwards, paid Boka Beverages “on a ‘bulk’ basis”.
“That is, Icon never paid the full amount of the invoices provided by [Boka] Beverages as it did not agree to the increases in the rates,” the document says.
“Icon made bulk payments to [Boka] Beverages in amounts that it calculated accorded with the rates set out in the agreement of June 2014.”
The document says Icon also made payments to Boka on occasions when it alleges Boka made demands or commercial threats such as restricting the release of stock.
“Icon needed to make such payments in the interests of the customers of Icon and Icon’s own business,” it says.
“Icon was also commercially vulnerable as to dismantle, relocate and establish operations at another location could take up to two (2) years.
“[Boka] Beverages, on numerous occasions, would restrict the access of Icon’s customers to physically pick up their ordered stock.
“As a result of Beverages conduct [sic], Icon lost one of its largest customers, Endeavour Beverages Pty Ltd, during 2015,” the document says.
Melhem says that “constant disruptions” due to Boka not releasing stock to Icon’s customers resulted in Icon’s largest customer, Urban Beverage Imports Pty Ltd, negotiating a deal with Boka without Icon’s knowledge.
“By that deal, [Boka] Beverages directly invoiced Urban in respect of product produced for Urban and was then supposed to provide a credit to Icon for the amount Icon was entitled to receive in respect of that product and according to the agreement,” he says.
“[Boka] Beverages did not provide Icon with a credit to which it was entitled to.”
The document says that to stop further dispatch disruptions, Icon subsequently authorised Boka to invoice Urban directly. Similar authorisations were then provided for Icon’s other clients Balmain Brewing and Australia Draught, the Broo Ltd product.
Hearings conclude today
Melhem suggested credits Boka provided to Icon in respect of these customers may have been less than the amount Icon is entitled to receive.
He says Icon has prepared a statement showing a reconciliation of the company’s account with Boka.
“Based on my calculations, at the rates set out in the agreement, which are the only rates ever to have been agreed between Icon and [Boka] Beverages… [Boka] in fact owes Icon $1,735,708.28,” he says.
“This amount of $1,735,708.28 represents an overpayment by Icon to [Boka] Beverages.”
Melhem says that in April 2017, Boka sent a letter to Icon’s customers setting out the amount stipulated in the Statutory Demand issued to Icon and requested that all payments be made to Boka directly.
“Icon has not provided such authority to all of its customers,” Melhem says.
The hearings before Supreme Court Judge Paul Brereton were scheduled to conclude in Sydney today.