Crompton Agribusiness Pty Ltd & Ors v Ball (No 2) No. DCCIV-02-438

[2002] SADC 140

CROMPTON ARGIBUSINESS PTY LTD & ORS V BALL (No. 2)
[2002] SADC 140

Judge Lunn
Civil

REASONS ON PLAINTIFFS’ APPLICATION FOR A CONTINUATION OF THE INTERLOCUTORY INJUNCTION

1. In October 1998 by an agreement in writing the First Plaintiff as franchisor granted a franchise to the Defendant (“The Franchise Agreement”) for the Defendant to conduct a seed grading and cleaning business within a specified territory in the east of South Australia and the north west of Victoria.  Clause 13 of that Agreement (“the Restraints Clause”) provided that the Defendant would not directly or indirectly carry on or be involved in any similar business within a specified area, which was wider than the territory which was the subject of the Agreement, during the “Restraint Period”.  The Restraint Period was defined as being three years after the expiration or termination of the Franchise Agreement, or, if that period was not enforceable, then two years after its expiration or termination.  The Franchise Agreement was terminated in October 2000 as part of a transaction whereby the Defendant sold his business and his interest in the franchise to the Second to Fourth Plaintiffs for $90,000.

2. The Plaintiffs allege, but the Defendant denies, that he had since October 2000 breached the Restraints Clause by being involved in competing businesses.  For my present purposes it is not necessary to go into the details.  There are also subsidiary causes of action raised by the Statement of Claim concerning misleading or deceptive conduct by the Defendant, but it is not necessary to deal with those in this application.

3. On 28 March 2002 the Plaintiffs instituted this action.  They sought an interlocutory injunction restraining the Defendant from being involved or interested in any seed grading or cleaning business which would be a breach of the Restraints Clause.  On 23 April 2002 another Judge of this Court granted an injunction until 30 October 2002 or further order restraining the Defendant in the terms sought.  (In his submissions counsel for the Plaintiffs claimed it was an extension of an injunction made on 16 May 2002.  My further research indicates that there is no order of this Court of that date, but that 16 May was the date upon which the order of 23 April 2002 was sealed by the Court.)  The Defendant did not oppose that order.  At least part of the pragmatic reason for him not opposing this order was that seed grading and cleaning is largely a seasonal activity which principally occurs between November and March.

4. The Defendant has filed a defence putting in issue any breaches of the Restraints Clause and any misleading and deceptive conduct by him.  He has pleaded that the Restraints Clause is unenforceable in law as being excessive in its territorial and temporal ambits and an unreasonable restraint on trade.  There have been contested interlocutory proceedings about discovery and pleadings.  At present an appeal is pending to the Supreme Court on some of these issues.  There is no realistic prospect that the action could be brought to trial before about the middle of 2003 at the earliest.  I am not in a position to say whether either party is to blame for any delays in the progress of the action.  What is at stake on this application is whether the Defendant can carry on seed grading and cleaning activities in the areas to which the Restraints Clause extends for the season which is about to begin.  In his affidavit in opposition the Defendant says unless he is restrained he intends either to carry on business or be employed as a seed grader in the coming season.  It is unclear whether he will do this on his own account or as the employee of some other business.

5. In Castlemaine Tooheys Ltd v State of South Australia (1986) 161 CLR 148 at 153 Mason ACJ said that an applicant for an interlocutory injunction had to establish each of the following three factors to be entitled to the injunction:

   1.     That there is a serious question to be tried:

   The principle issue here is whether the Restraints Clause in the Franchise Agreement is legally enforceable.  This is a notoriously uncertain area of the law and there is no clear answer to the issue on the material before me.  There is a serious question to be tried.  The Defendant’s counsel did not dispute this.

   2.That the Plaintiffs will suffer irreparable injury for which damages will not be an adequate compensation unless an injunction is granted:

   It is not necessary to go into precisely what damage the Plaintiffs are likely to suffer if they do succeed at the trial: Francesco Cinzano Pty Ltd v Ruggiero (No.1) (1979) 25 SASR 321. While the profits from individual transactions can be readily ascertained there could well be a more difficult component to the Plaintiffs’ damages of a loss of future market share if the Defendant competes with them in breach of the Restraints Clause. I find this factor to be established.

   3.That the balance of convenience favours the granting of an injunction:

   If the Court ultimately finds that the Restraints Clause is unenforceable, the Defendant will have been legally entitled to be involved or interested in businesses in competition with that of the Plaintiffs.  The Defendant has no other readily available means to earn his livelihood in the forthcoming season other than by working as a seed grader.  He is likely to suffer substantial economic hardship if an injunction precludes him from so working.  He has offered to give details monthly to the Plaintiffs of the amounts received by him for seed grading and sales of seed treatment and to advise the names of customers for whom he provides such services and treatments and of persons who employed him.  This will facilitate any assessment of damages if it is ultimately held that he was in breach of the Restraint Clause in so working.  While obviously the Plaintiffs continuing business is likely to be diminished to some extent if the Defendant is involved in competing businesses there is no evidence this will cause any particular economic hardship for the Plaintiffs.  Whether the Plaintiffs ultimately win or lose there will be difficult questions of assessment of damages or of compensation orders under the Plaintiffs’ undertakings as to damages.  The Defendant’s offer to give monthly details of his activities will facilitate any assessment of damages which is necessary against him.  It is a factor in the exercise of the Court’s discretion.  However, rather than it being by way of an undertaking it should be part of the order of the Court: Concrete Systems Pty Ltd v Devon Symonds Holdings Ltd (1978) 20 SASR 79. On the basis that there will be appropriate conditions requiring the Defendant to record and notify the Plaintiffs’ solicitors of his activities I find that the Plaintiffs have not shown that the balance of convenience favours the granting of the continued interlocutory injunction and their application is refused.

6. I will hear the parties on the precise terms of the order which is to be made.