Atarashii Stone Pty Ltd v Granite Transformations Pty Ltd (No 2)
[2017] ACTSC 139
•6 June 2017
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Atarashii Stone Pty Ltd v Granite Transformations Pty Ltd (No 2) |
Citation: | [2017] ACTSC 139 |
Hearing Dates: | 5, 6 June 2017 |
DecisionDate: | 6 June 2017 |
Reasons Date: | 19 June 2017 |
Before: | Mossop J |
Decision: | 1. Order 1 of Murrell CJ of 19 May 2017 continues until further order. 2. Costs of the hearing including the reserved costs are costs in the cause. 3. The matter is to be listed for hearing on 5 September 2017 with an estimate of 4 days. |
Catchwords: | EQUITY – INTERLOCUTORY INJUNCTION – Application for interlocutory injunction to be continued – termination of franchise contract by franchisor – whether plaintiff conducting business in a manner justifying preservation of the status quo – whether irreparable harm for which damages not an appropriate remedy a separate condition precedent to grant of interlocutory injunction – balance of convenience favours injunctive relief – injunction continued |
Cases Cited: | Atarashii Stone Pty Ltd v Granite Transformations Pty Ltd [2017] ACTSC 116 Australian Broadcasting Corporation v O’Neill [2006] HCA 46; 227 CLR 57 Bankstown City Council v Alamdo Holdings Pty Ltd [2005] HCA 46; 223 CLR 660 Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499 Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 Lucas Stuart Pty Ltd v Hemmes Hermitage Pty Ltd [2010] NSWCA 283 Murphy v Lush (1986) 60 ALJR 523 Stratford Sun Ltd v OM Holdings Ltd [2011] FCA 414 Varley v Varley [2006] NSWSC 1025 Waterways Authority of NSW v Coal and Allied (Operations) Pty Ltd [2007] NSWCA 276 |
Texts Cited: | G E Dal Pont, Equity and Trusts in Australia (Thomson Reuters, 6th ed, 2015) W Gummow, “The Injunction in Aid of Legal Rights – An Australian Perspective” (1993) 56 Law and Contemporary Problems 83 R Meagher, D Heydon and M Leeming, Meagher Gummow & Lehane’s Equity Doctrines & Remedies (Butterworths LexisNexis, 4th ed, 2002) I C F Spry, The Principles of Equitable Remedies (Lawbook Co, 9th ed, 2014) P Young, C Croft and M Smith, On Equity (Thomson Reuters, 2009) |
Parties: | Atarashii Stone Pty Ltd (Plaintiff) Granite Transformations Pty Ltd (Defendant) |
Representation: | Counsel Mr P Walker SC (Plaintiff) Mr D Mahendra (Defendant) |
| Solicitors Trinity Law (Plaintiff) Gilberts Legal (Defendant) | |
File Number: | SC 138 of 2017 |
MOSSOP J:
Introduction
On 6 June 2017 I made an order continuing an injunction preventing the defendant from relying upon a purported termination of a franchise agreement. These are my reasons for making that order.
The proceedings involve the plaintiff, a franchisee, and the defendant, a franchisor. The franchise relates to the provision of a composite stone product which is used to create bench tops within houses. On 1 May 2017 the defendant purported to terminate the franchise agreement. Subsequently, on 3 May 2017, the plaintiff commenced proceedings seeking orders including a declaration that the termination was void and of no effect and restraining the defendant from relying upon or implementing the termination of the contract.
The proceedings were initially heard by the Chief Justice on 10, 17 and 19 May 2017. On 19 May her Honour granted an interim injunction restraining the defendant from relying on or implementing its termination of a franchise agreement with the plaintiff until 4:00pm on 5 June 2017: see Atarashii Stone Pty Ltd v Granite Transformations Pty Ltd [2017] ACTSC 116. The proceedings were then adjourned and listed before me on 5 June 2017. The reason for granting an interim injunction and having the matter relisted for consideration whether or not that interim injunction should be extended was so as to permit the plaintiff to put on evidence that it was operating the franchise business in a satisfactory manner and that the continuation of the interlocutory injunction would not require a degree of supervision by the Court such that the injunction would not be continued. Her Honour had recorded in her reasons (at [41]):
I am sceptical about the plaintiff’s capacity to make the business operational in the near future. On the other hand, the failure to grant an injunction for a short period will, in a practical sense, seal the fate of the plaintiff’s business.
The background to the proceedings and the contentions of the parties are set out in her Honour’s earlier reasons and, save as referred to below, it is unnecessary to repeat them.
At the hearing before me, the parties read the following affidavits:
(a)Deborah Ann Strickland 1 June 2017
(b)Maurice Sebastian Falcetta 4 June 2017
(c)Sophia Malone 3 May 2017
(d)Darren Jones 9 May 2017
(e)Jodi Miller 9 May 2017
(f)Anthony D’Addio 10 May 2017.
There was some contention before me as to whether the function of the Court in considering whether to extend her Honour’s interim order was simply to determine whether the plaintiff could be made operational and the extent to which it had a business such that the balance of convenience made it worth protecting by interlocutory injunction or whether it extended to reconsidering de novo whether or not any injunction should be granted.
On an interlocutory matter such as this which has been dealt with by one judicial officer and is then dealt with by another, I consider that it is necessary for the second judicial officer to consider the matter afresh. However that does not necessarily require consideration of the matter as if it had not previously been dealt with by the Court. In the present case I considered it appropriate to have regard to the reasons of the Court for granting an interim injunction because they are available and reflect a considered decision on the issue.
So far as her Honour considered that there were a number of identified matters on which there was a serious question to be tried, I agree that each of those matters raises a serious question to be tried (in the sense required by Australian Broadcasting Corporation v O’Neill [2006] HCA 46; 227 CLR 57). So far as the balance of convenience is concerned, I accepted the plaintiff’s submissions that the plaintiff has, since the fire referred to in the Chief Justice’s reasons at [3]:
(a)arranged for a loan of up to four trained installers from other franchisees;
(b)arranged for the training of staff with other franchisees if that training is not provided by the defendant;
(c)has an operational system for providing quotes, making appointments with customers, attending customer’s homes or places of work, preparing quotations and drawings and providing samples to customers, even though there is a dispute about the manner in which that is being done;
(d)has provided 11 quotations between 19 May 2017 and 1 June 2017;
(e)has received 27 of acceptances for work and entered into 13 written contracts;
(f)outsourced manufacturing of the cabinets upon which the bench tops are installed to two different cabinet making companies, one of which is used by another franchisee;
(g)has installed the software used by one of those companies on its computer system;
(h)has available to a range of tradespersons for cabinet installation; and
(i)has staff who are available to install the bench tops when they have been formally trained, noting that they have received some training from another franchisee and are not presently needed for installations because of the lead time of six to eight weeks from order to installation.
The plaintiff placed orders for 89 slabs of stone from December 2016 until 3 May 2017 and has placed orders for a further 30 slabs of stone since the granting of interim relief. The plaintiff has received a lack of cooperation from the defendant in relation to that most recent order and, as a consequence, is in the process of obtaining that stone from another franchisee.
There has been some disruption to the operations of the plaintiff because of an attempt to port its telephone number. The circumstances in which this has occurred are not clear but it does provide an explanation for some disruption of the plaintiff’s business between 31 May and 2 June 2017.
At no time has there been any contention that the plaintiff has failed to order the minimum quantity of stone required to be ordered under the franchise agreement.
The plaintiff has been informed that the rectification work necessary following the fire in its premises it is expected to be completed by 17 September 2017.
The plaintiff has ordered a new “Edge bander” machine from Germany at a cost of
$176 000, which has not yet been delivered.
The evidence discloses that the defendant has not acted in a manner that would facilitate the successful operation of the business even during the period when the interim order has been in place.
(a)It has insisted that the plaintiff’s staff be trained at the Head Office even though there is evidence that the defendant has not insisted on such a process in relation to another franchisee and instead has permitted other installers accredited by the defendant to do the training (although it has indicated that training should be able to be provided shortly);
(b)It has imposed conditions upon the supply of stone which are not imposed upon other franchisees including changing the payment terms.
I was satisfied that the plaintiff is conducting a business and doing so in a manner which will not, in the relevant period, require such supervision by the Court as would be a barrier to the granting of further interlocutory relief. It appears to be conducted on a modest scale and in a less than ideal manner. However if interlocutory relief was not granted, then the business as a whole would shut down. That would have involved the loss of the goodwill of the company which was acquired as part of the sale of business agreement and a loss of employment for the staff of the business. It would have significant consequences for the existing contracts of the business and the investment made so as to re-establish the business following the fire which affected its premises.
A significant component of the defendant’s submissions was directed to the proposition that the plaintiff was not entitled to injunctive relief because damages were an adequate remedy. In the Chief Justice’s earlier decision, her Honour stated that in the circumstances it would not be particularly difficult to assess damages and evidence would be available regarding the profitability of the business if it was successfully run because it was being successfully run when the plaintiff purchased it. The defendant relied upon this finding to support a submission that “it is trite law that an injunction will not follow where damages is an adequate remedy”. That contention was contrary to the approach adopted by her Honour in her earlier decision. Her Honour at [12] reached the conclusion that “the adequacy of remedy by way of damages is an important factor to be weighed when considering the balance of convenience” along with other factors to which she referred. Her Honour did not address it as a precondition to the granting of relief.
The defendant referred to the decision of Mason ACJ in Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 at 153, where his Honour identified three requirements for any interlocutory injunction, being first, that there is to be a serious question to be tried; second, that the plaintiff will suffer irreparable injury for which damages will not be an adequate remedy; and third, that the balance of convenience favoured the granting of an injunction.
A decision of a single judge of the High Court when exercising the original jurisdiction is, whilst of significant persuasive value, not binding upon this Court: Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499 at 504.
In contrast to the approach of Mason ACJ in Castlemaine Tooheys, in Murphy v Lush (1986) 60 ALJR 523 at 524 a full court of the High Court articulated a two part test, namely that there was a triable issue and that the balance of convenience favoured the granting of an injunction.
The defendant also refered to a number of other authorities which it submitted supported its approach: Stratford Sun Ltd v OM Holdings Ltd [2011] FCA 414, Lucas Stuart Pty Ltd v Hemmes Hermitage Pty Ltd [2010] NSWCA 283; Bankstown City Council v Alamdo Holdings Pty Ltd [2005] HCA 46; 223 CLR 660; Waterways Authority of NSW v Coal and Allied (Operations) Pty Ltd [2007] NSWCA 276, although in my view those authorities do not extend so far as is suggested by Castlemaine Tooheys that irreparable injury for which damages will not be an appropriate remedy is an independent condition which must be satisfied in order that an interlocutory injunction be granted.
This is not an appropriate occasion on which to conduct a detailed examination of the different lines of authority that exist as to whether or not irreparable harm for which damages will not be an appropriate remedy is an independent criterion for the granting of an injunction or whether it is simply an element of the balance of convenience. It is sufficient to say that there is no authoritative decision binding upon me which compels the conclusion sought by the defendant. Relevant texts did not support the contention that it is essential that there is an independent requirement for irreparable harm.
Young, Croft and Smith, On Equity (Thomson Reuters, 2009) provides at [16.380]:
some formulations of the guidelines list adequacy of damages as a separate consideration (see, for example, Castlemaine Tooheys Ltd v South Australia), while others include it in the “balance of convenience”. It is a dry debate as to which is correct; the present authors prefer the former approach.
(footnotes omitted)
Thus, while preferring it as a separate element, the authors recognise that be issue has not been definitively resolved.
Dr Spry in The Principles of Equitable Remedies (Lawbook Co, 9th ed, 2014) at 473does not take a definitive position on the issue but says “It has often been said that in order to establish a right to an interlocutory injunction the plaintiff must be able to show that he is threatened with irreparable injury”. He then describes injury as being irreparable if were the plaintiff to be confined to such remedies as damages the plaintiff would suffer “substantial prejudice or hardship in a material respect”.
Meagher Gummow & Lehane’s Equity Doctrines & Remedies (Butterworths LexisNexis, 4th ed, 2002) provides (at [21-375]):
In order to determine whether to grant relief the court will have regard to such factors as the adequacy of damages, the possibilities of alternative remedies, whether there has been any laches and delay, the strength of the grounds of defence suggested by the defendant, what, if any, undertakings the defendant is prepared to give, and, most importantly, hardship and the balance of convenience. If any infringement of the plaintiff’s right between wit and hearing would be properly compensated in damages, that fact alone can (but not must) be a ground for declining an injunction.
That approach which considers the adequacy of damages as simply one of a number of factors is consistent with the extra curial views of Gummow J expressed when he was a judge of the Federal Court that:
In the Australian decisions over the last twenty-five years, matters have gone further in favour of extending the availability of the injunction. The point is illustrated by reference to the recent acceptance of the proposition that the court should not ask whether damages would provide the plaintiff with an adequate remedy, but rather whether, in all the circumstances, it is just that the plaintiff should be confined to his remedy in damages.
…
The result of these developments you that little is now heard in Australian courts of any “rule” as to the need for “irreparable injury.”:
See “The Injunction in Aid of Legal Rights - An Australian Perspective” (1993) 56 Law and Contemporary Problems 83 at 94-5.
Professor Dal Pont in Equity and Trusts in Australia (Thomson Reuters, 6th ed, 2015) at [31.110] reaches a similar conclusion.
In those circumstances I considered that I should follow the same approach as the Chief Justice and treat the availability of other remedies and questions of the adequacy of damages as simply a factor to be considered when determining whether balance of convenience lies. I did not consider that the establishment of irreparable injury for which damages will not be adequate compensation was a separate and independent criterion which must be established. I reached that conclusion not only as a matter of comity but also because it appears to me to be the better approach to the availability of injunctions in the auxiliary jurisdiction.
In those circumstances I considered that I should adopt the same approach as that adopted by the Chief Justice in her earlier decision (see [16] above), namely to consider the nature of the harm suffered and the extent to which it would be adequately addressed by an award of damages as part of the balance of convenience.
Had I not adopted this approach and approached the matter on the basis that it was an essential precondition that the plaintiff demonstrate the risk of irreparable harm, it would then have been necessary to consider the evidence in greater detail and determine whether to reach a different conclusion from that reached by the Chief Justice at [35]. It would also have been necessary to consider whether what was required to be established was the existence of irreparable harm or simply whether there was a serious question to be tried as to whether the common law remedies would be inadequate: see Varley v Varley [2006] NSWSC 1025 at [19]-[25], Lucas Stuart Pty Ltd v Hemmes Hermitage Pty Ltd at [6].
Having regard to the additional evidence available at the hearing before me I was satisfied that the business is being conducted in a manner that warrants the continuation of the interlocutory injunction.
I was not satisfied that the continuation of the injunction would require the ongoing supervision of the Court. To the extent to which the defendant appears to have been putting additional obstacles in the way of the plaintiff in properly carrying out its business, that may well reflect upon the defendant’s attitude to the plaintiff as a franchisee but does not in the circumstances advance its attempts to resist the continuation of the injunction.
I was not satisfied that the allegations of ongoing breach of the agreement were such that an injunction should not be continued until the trial. The allegations of breach appeared even if they had been established to be relatively minor matters in the context of an injunction likely to continue for a relatively short period.
I considered that the balance of convenience favoured the continuation of the injunction. I reached the conclusion that the balance of convenience favoured the continuation of the injunction more readily because of the potential to have a final hearing in under three months and the fact that there has not been any allegation that the plaintiff has failed to order at least the minimum quantities of stone from the defendant.
| I certify that the preceding thirty-four [34] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Mossop Associate: Date: 19 June 2017 |
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