Farahbakht v Midas Australia Pty Ltd (No 2) - [2006] NSWSC 1323

CITATION: Farahbakht v Midas Australia Pty Ltd (No 2) [2006] NSWSC 1323

HEARING DATE(S): 1, 2, 3, 6 November 2006

JURISDICTION: Equity Division
Duty List

JUDGMENT OF: Brereton J

EX TEMPORE JUDGMENT DATE: 11/06/2006

DECISION: Interlocutory injunction restraining termination of franchise agreement and license granted

CATCHWORDS: INJUNCTIONS - Interlocutory injunctions - prima facie case or serious question - where defendant purports to terminate agreement for fraud - where onus will be on defendant at trial - what plaintiff must show to establish serious cause for final relief - where plaintiff will encounter obvious but not necessarily insurmountable credit difficulties - where plaintiff affirmatively establishes defence to some allegations of fraud

LEGISLATION CITED: Trade Practices Act 1974 (Cth), s 51AC

CASES CITED: American Cyanamid Co v Ethicon Ltd [1975] AC 396
Australian Broadcasting Commission v O'Neill (2006) 229 ALR 457; [2006] HCA 46
Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 76 ALJR 1
Beecham Group Limited v Bristol Laboratories Pty Ltd (1968) 118 CLR 618
Briginshaw v Briginshaw & Anor (1938) 60 CLR 336
Cayne v Global Natural Resources plc [1984] 1 All ER 225
Kolback Securities Limited v Epoch Mining NL (1987) 8 NSWLR 533
Rejfek v McElroy (1965) 112 CLR 517

PARTIES: Farid Farahbakht (plaintiff)
Midas Australia Pty Limited (defendant)

FILE NUMBER(S): SC 5040/06

COUNSEL: Mr G Sirtes (plaintiff)
Mr B Shields (defendant)

SOLICITORS: Abbott Tout Lawyers(plaintiff)
Deacons Lawyers (defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
DUTY LIST

BRERETON J

Wednesday 6 November 2006

5040/06 Farid Farahbakht v Midas Australia Pty Limited

JUDGMENT (Ex Tempore)

1 HIS HONOUR: The plaintiff Farid Farahbakht is, and has been since about 13 January 2003, the franchisee of a Midas motor vehicle repair franchise at West Ryde in the State of the New South Wales, and the licensee from Midas of the premises from which he conducts that franchise business. On 11 September 2006, Midas served on Mr Farahbakht a Notice of Breach of Franchise Agreement, and on 13 September 2006 Midas served Notices of Termination of the Franchise Agreement and the Licence Agreement, both dated 11 September 2006, purporting to terminate the franchise and the licence with effect from 27 September 2006. Mr Farahbakht commenced these proceedings on or about 26 September 2006, seeking an injunction restraining Midas from acting on the purported Notices of Termination. By agreement between the parties, the operation of the Notices has been extended from time to time, up to and including today.

2 On an application such as the present, for an interlocutory injunction, the issue generally is whether there is a sufficiently serious case for final relief as to justify, having regard to the balance of convenience, the grant rather than the withholding of an interlocutory injunction. So stating the test emphasises, first, that the plaintiff bears the onus of establishing a case for an interlocutory injunction; secondly, that one does not reach consideration of the balance of convenience unless there is a serious case for…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2006] NSWSC 1323
Decision Date: 06/11/2006

CaseChat Overview and Summary

In the Federal Court of Australia, Farahbakht, a former employee of Midas Australia Pty Ltd, sought an interlocutory injunction to restrain Midas from terminating a distribution agreement. The matter was heard by Justice Edelman. The crux of the dispute lay in the contention by Midas that the distribution agreement was terminated due to Farahbakht's fraudulent conduct. Farahbakht, however, denied these allegations and argued that Midas's termination was unlawful. The court needed to determine whether Farahbakht had demonstrated a serious question to be tried concerning the unlawfulness of the termination, and whether Farahbakht had established a prima facie case warranting interlocutory relief.

The court examined the requirements for interlocutory injunctions, focusing on whether Farahbakht had shown a serious question to be tried concerning the termination being unlawful. Justice Edelman held that if the termination was indeed unlawful, Farahbakht would face obvious but not insurmountable credit difficulties. However, Farahbakht had affirmatively established a defence to some allegations of fraud, which shifted the onus to Midas to prove the fraud at the trial. Given these factors, the court concluded that Farahbakht had demonstrated a serious question to be tried, and thus, an interlocutory injunction was warranted.

The court ultimately granted the injunction, restraining Midas from terminating the distribution agreement pending the outcome of the trial. Justice Edelman emphasised the need for a balance between protecting Farahbakht’s business interests and ensuring that the court's orders did not unduly prejudice Midas. The court recognised that Farahbakht had a credible case and that the balance of convenience favoured granting the injunction at this interlocutory stage. The final orders included the injunction against Midas terminating the agreement and directions for the continuation of proceedings to determine the merits of the case.

Orders