Instant Rewards Pty Ltd v Baker Motors Pty Ltd

[2003] NSWSC 312

CITATION:	Instant Rewards Pty Ltd v Baker Motors Pty Ltd [2003] NSWSC 312
HEARING DATE(S):	11 April, 2003
JUDGMENT DATE:	11 April 2003
JURISDICTION:	Equity Division
JUDGMENT OF:	Palmer J
DECISION:	Mandatory injunction refused with costs.
CATCHWORDS:	MANDATORY INJUNCTION - DISCRETION - Plaintiff seeks mandatory injunction that Defendant perform advertising contract by providing free services to the public - Defendant has strong prima facie case that contract procured by misleading and deceptive conduct - balance of convenience - if mandatory injunction granted Defendant would obtain whole of relief sought before trial.
LEGISLATION CITED:	Trade Practices Act 1974 (Cth) - s.52
CASES CITED:	- Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499 - Shepherd Homes Limited v Sandham [1971] Ch 340
PARTIES :	Instant Rewards Pty Ltd t/a Merchant Sampler Advertising - Plaintiff Baker Motors Pty Ltd - Defendant
FILE NUMBER(S):	SC 2059/03
COUNSEL:	M. Elliott - Plaintiff J.G. Renwick - Defendant
SOLICITORS:	Henry Davis York - Plaintiff James G. Sloan - Defendant

Ex tempore

1    By its Amended Notice of Motion the Plaintiff seeks a mandatory interlocutory injunction compelling the Defendant to honour an alleged obligation to provide free services in respect of 1,268 coupons contained in a coupons booklet produced by the Plaintiff and entitled “1073 Border FM Presents Merchant Sampler”. I will deal with the application for that injunction first and then I will consider the other relief which the Plaintiff seeks in its Amended Notice of Motion.

2    The Plaintiff carries on business of producing and selling to the public books which contain coupons offering free products or services. The way in which the Plaintiff operates its coupon business is as follows. It invites merchants conducting businesses in a particular region to sign an advertising agreement pursuant to which the Plaintiff produces an advertisement for the merchant on a coupon which appears in the Plaintiff's coupon book distributed for that region. The coupon entitles the purchaser of the coupon book to a free product or service of the merchant to a stated value.

3    If the merchant agrees to the proposal, the merchant enters into an advertising agreement with the Plaintiff. Coupons are printed in accordance with the advertising agreement and included in a coupon book which is then sold to the public in that particular region.

4    The Plaintiff's evidence is that in early February 2003, one of its sales representatives, a Mr Griffiths, travelled to the Albury/Wodonga area for the purpose of soliciting business from merchants in that area in order to procure advertising contracts which are the basis for the issuing of the Plaintiff's coupon books.

5    Mr Griffiths says that he attended at the business premises of the Defendant. The Defendant carries on business under the name Baker Motors mainly as a car dealer but it also provides car maintenance services.

6    Mr Griffiths' evidence is that when he arrived at the premises of Baker Motors he explained to the counter clerk that he was an advertising representative and asked to speak to the service manager. Mr Griffiths' evidence is that a few minutes later he was introduced to Mr Kenneth Bailey and told him that he was offering free advertising on behalf of the Plaintiff and was looking for a motor vehicle dealership with a workshop to benefit. Mr Griffiths says that he told Mr Bailey:
“We advertise merchants in a book like this. We are currently compiling a book for the Albury, Wodonga area. We will cover the cost of all the art work, printing and distribution of the book. If you have a logo, we will place that on at no charge. All we ask is that you make an offer to the customer to encourage them into their business, something that is of a gift nature, something free.”

7    He says that he handed Mr Bailey the voucher book that he carried as a sample and drew his attention to coupons within that book which contained offers from another motor vehicle dealership.

8    He says that, having looked through that coupon book and another two sample voucher books containing offers by other motor vehicle dealerships, Mr Bailey said: “So this doesn’t cost us anything" , to which Mr Griffiths replied: “That's right other than your offer in the book, it is absolutely without charge of any kind" .

9    He says that Mr Bailey reviewed advertising samples that were shown to him and then selected one of them which was a sample advertisement in respect of a lubrication service and oil change. He says that he then showed Mr Bailey the advertising agreement, that Mr Bailey read the conditions, and then asked Mr Griffiths: “What do you require from us?” . Mr Griffiths says that he responded: “I will complete all the paperwork, all I need is your business card so that I can take down the necessary details.”

10    A short time later, after Mr Bailey had left him for a few minutes, he had another conversation with Mr Bailey in which he asked Mr Bailey the normal value of the lubrication service and oil change offer which Mr Griffiths says Mr Bailey had agreed to include in the coupon booklet. Mr Bailey responded, "It is valued at $120.00” . Mr Griffiths says that he then handed Mr Bailey the advertising agreement which Mr Bailey appeared to read and then signed.

11    The Defendant included a coupon offering the free service by the Plaintiff in a coupon book which was sold by the Plaintiff to members of the public in the Albury/Wodonga area. Some time later, the Plaintiff contacted the Defendant when the Defendant refused to honour a voucher for a lubrication service and oil change which had been included in the coupon book.

12 The Defendant's position may be summarised thus. The Defendant says that Mr Bailey, who was its service manager, had no authority to enter into the advertising contract which he signed. The Defendant says (and Mr Bailey has also given evidence to this effect) that it was represented to Mr Bailey that all that he was signing was something which would enable a proof of the advertisement to be sent by the Plaintiff to the Defendant for approval. The Defendant says that the conduct of the Plaintiff in procuring Mr Bailey's signature on the advertising agreement was misleading and deceptive and that it has a defence to the Plaintiff's claim to enforce the contract, that defence being under s.52 of the Trade Practices Act 1974 (Cth) and, no doubt, other defences as well.

13    The significance of the advertising contract which was signed by Mr Bailey must be understood. The form of the advertising contract is contained on one page. The print is somewhat small, although it is legible with some effort. The first clause of the contract states that the Plaintiff,
“… at its own expense and ABSOLUTELY WITH OUT CHARGE OF ANY KIND TO THE MERCHANT shall make known to the public attention the advertising message of the merchant, as herein set forth printing and distributing Coupon Books bearing the Merchant's trade name and advertising message printed upon one of the coupons contained in such books, each said coupons to be honoured redeemed by the merchant in the manner herein after set forth.”
14    The terms of the advertisement to be included in the coupon booklet are set out in Clause 6. The term during which the coupon is to be valid is for a period of seven months from the date of the advertising contract, which is 3 February 2003. Clause 7 provides:
“Distribution of coupon Books containing the above Coupon shall be limited in number from one to 3,000 Coupon Books. Each Coupon shall have printed thereon the date on which the free offer contained therein expires.”

Clause 8 provides:
“I have carefully read this agreement and fully understand it and my obligation to honour up to 3,000 coupons and acknowledge receipt of a copy thereof.”

15    The advertising contract requires that the Defendant provide free services to the public in respect of a coupon which may be contained in up to 3,000 coupon booklets. The value of the free service to be provided by the Defendant is $120. Accordingly, the obligation to which the Defendant was committing itself when Mr Bailey signed this contract was an obligation to provide services free to the public to a maximum value of $360,000 over a period of seven months.

16    It is starkly apparent from the evidence of Mr Griffiths that he did not explain to Mr Bailey, who was after all only a service manager of the company and not a director, that the obligation to which Mr Bailey was being asked to commit the company was an obligation which could require the company to provide free services to the public to a value of $360,000. It must have been apparent to Mr Griffiths that the contract which he was asking Mr Bailey to sign would require services to that value to be provided by the Defendant, once Mr Griffiths was informed that the value of each service was $120. It is of some significance that Mr Griffiths did not ask that a contract containing a financial obligation of that magnitude be signed or approved by a Director or General Manager of the Defendant, and that the contract was sought by him from a person whom he knew to be a service manager.

17    It seems to me at this stage that there is a strong prima facie case made by the Defendant that the contract obtained by the Plaintiff was obtained by misleading and deceptive conduct on the part of the Plaintiff's representative. I must weigh that in the balance when I consider whether a mandatory interlocutory injunction should be granted. In saying what I have said, of course, I fully appreciate that the evidence is at an early stage and it is by no means complete. Further, I bear in mind that the evidence on affidavit has not been tested by cross examination. The remarks which I have made nevertheless are founded upon the evidence adduced on behalf of the Plaintiff itself, principally the evidence of Mr Griffiths.

18    The matter of real significance, of course, is where the balance of convenience lies. The Plaintiff seeks the somewhat unusual relief of a mandatory interlocutory injunction which will compel the Defendant to expend a considerable sum in providing services in response to coupons issued to the public. As I have said, the evidence presently suggests that some 1,268 coupon booklets have been sold to the public so that the value of services which the Defendant would be required to provide, if the injunction were granted, would exceed $126,000. That money, of course, would come out of the pocket of the Defendant.

19    There is ample authority for the well established proposition that the Court should be very careful indeed before it grants a mandatory interlocutory injunction. I refer to what was said by Megarry J in Shepherd Homes Limited v Sandham [1971] Ch 340, at 351, cited with approval by Gummow J in Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499, at 503:
“… mandatory injunctions generally carry a higher risk of injustice if granted at the interlocutory stage: they usually go further than the preservation of the status quo by requiring a party to take some new positive step or undo what he has done in the past; an order requiring a party to take positive steps usually causes more waste of time and money if it turns out to have been wrongly granted than an order which merely causes delay by restraining him from doing something which it appears at the trial he was entitled to do; a mandatory order usually gives a party the whole of the relief which he claims in the writ and makes it unlikely that there will be a trial. One could add other reasons, such as that mandatory injunctions (whether interlocutory or final) are often difficult to formulate with sufficient precision to be enforceable. In addition to all these practical considerations, there is also what might be loosely called a ‘due process’ question. An order requiring someone to do something is usually perceived as a more intrusive exercise of the coercive power of the state than an order requiring him temporarily to refrain from action. The court is therefore more reluctant to make such an order against a party who has not had the protection of a full hearing at trial.”

20    In the present case, the Plaintiff says that the damage which would be occasioned to the Defendant if the injunction were granted but the Defendant failed at trial will be compensated by it proffering the usual undertaking as to damages, which it is prepared to support by a bank guarantee. I would draw attention to the fact that if the injunction is granted and the Defendant is compelled to provide to 1,268 coupon holders or thereabouts the free services to which the coupon entitles them, it will be providing those services at its cost, pending determination of these proceedings. If it is successful in its defence, it will remain out of pocket until it recovers the compensation which is secured by the Plaintiff's proffered bank guarantee.

21    It is, however, very evident that the proceedings may well not come on for hearing at first instance for a number of months, possibly not this year as the list presently stands and depending upon the speed with which the parties prepare for preparation. Further, I must take into account that the decision may be taken on appeal by the Plaintiff if it is unsuccessful, and that a further year may elapse before there is a final determination. In other words, if the mandatory interlocutory injunction is granted, even with the usual undertaking as to damages and the bank guarantee in support, the cash flow of the Defendant very probably will be severely prejudiced by the necessity to provide, at the Defendant's own cost, free services to the public in respect of some 1,200 coupons.

22    I bear in mind that the evidence of the Defendant by its managing director, Mr Baker, is that the total advertising budget for the Defendant for a year would not exceed $200,000, the great bulk of which is expended in advertising for car sales. The advertising budget for a lubrication service of the sort to be provided in the coupon is said to be something in the order of $2,000 a year. One can see, therefore, that the expenditure by the Defendant of in excess of $120,000, over a period of some remaining three or four months while the coupon offer is valid, would be a very severe drain upon its resources, bearing in mind that the free services offered in the coupon are of a sort for which it would only expend some $2,000 in advertising for a whole year.

23    In those circumstances, I asked Mr Elliott, who appears for the Plaintiff, whether the Plaintiff was able to offer any other means of compensating the Defendant for the possible damage it may suffer pending determination of these proceedings, that damage being, as I say, the drain upon its normal cash flow. Mr Elliott did not have instructions to make any additional offer as to an undertaking or as to security in support beyond that which he has already proffered.

24    In those circumstances, it seems to me that in the exercise of the Court's discretion, a mandatory interlocutory injunction should be refused. I bear in mind, as I have said, that the Plaintiff's case seems at the moment to me on the evidence as presented to be weak in that the Defendant has shown a strong prima facie case at this stage of a defence of misleading and deceptive conduct under the Trade Practices Act . I bear in mind that the undertaking as to damages, supported even though it is by the guarantee, will not protect the Defendant from possibly significant short term damage which will be occasioned to its cash flow if the injunction is granted. I bear in mind also that granting a mandatory interlocutory injunction will, in the circumstances of this case, give the Plaintiff on an interlocutory basis the whole of the relief which it claims on a final basis.

25    All of those circumstances seem to me to militate strongly against the grant of the injunction and accordingly I refuse it.

26    The Defendant seeks an order that the Plaintiff pay its costs of the Notice of Motion. Mr Elliott does not really resist that order. The Defendant seeks an order that the costs be assessed and paid forthwith rather than abiding the result of the proceedings.

27    I think in the circumstances of this case, a mandatory injunction having been sought and refused and the Defendant obviously having been put to some expense in meeting that application, the proper order is that the Defendant's costs be assessed and paid forthwith.

28    The prayers for relief in paragraph 1 of the Plaintiff's Amended Notice of Motion are dismissed. It is noted that the relief sought in paragraph 2 of the Amended Notice of Motion is no longer sought. I stand the remainder of the Amended Notice of Motion over into the next Expedition List on a date to be advised by my Associate to the parties.

29    I order that the Plaintiff pay the Defendant's costs of today and the Defendant's costs of and relating to the application for the relief sought in paragraph 1 of the Amended Notice of Motion. The Defendant's costs in that respect may be assessed and will be paid forthwith.

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Last Modified: 04/16/2003