J H Fenner and Co Ltd v Gulf Conveyor Systems Pty ltd
[1998] FCA 873
•30 JUNE 1998
FEDERAL COURT OF AUSTRALIA
INJUNCTIONS - application for interlocutory injunctive relief - alleged breach of distribution agreement - whether novation necessary in relation to distribution agreement - assignability of distribution agreement - whether sale agreement effected assignment of distribution agreement - relevance of conduct of applicants - estoppel - confidential information - ‘springboard doctrine’ - effect of delay on grant of relief - adequacy of damages - whether serious question to be tried - injunction refused.
TRADE PRACTICES - application for injunctive relief - misleading and deceptive conduct.
Kemp v Baerselman (1906) 2 KB 604
Roger Bullivant v Ellis (1987) FSR 172
J H FENNER & CO LIMITED, TURNER BELTING LIMITED v GULF CONVEYOR SYSTEMS PTY LTD, SOUTHERN CONVEYOR ALLIANCE PTY LTD, PIT TOP MINING PTY LIMITED T/AS PITTOP, COLIN WILLIAM BENJAMIN, DONNA LEE BENJAMIN, GEOFFREY EDWARD HAMMOND, RONALD PETER JAMES SLATTERY, STEPHEN O’DONNELL
NG 550 of 1998
MOORE J
31 JUNE 1998
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG550 of 1998
BETWEEN:
J H FENNER & CO LIMITED
FIRST APPLICANTTURNER BELTING LIMITED
SECOND APPLICANTAND:
GULF CONVEYOR SYSTEMS PTY LTD
FIRST RESPONDENTSOUTHERN CONVEYOR ALLIANCE PTY LTD
SECOND RESPONDENTPIT TOP MINING PTY LIMITED T/AS PITTOP
THIRD RESPONDENTCOLIN WILLIAM BENJAMIN
FOURTH RESPONDENTDONNA LEE BENJAMIN
FIFTH RESPONDENTGEOFFREY EDWARD HAMMOND
SIXTH RESPONDENTRONALD PETER JAMES SLATTERY
SEVENTH RESPONDENTSTEPHEN O’DONNELL
EIGHT RESPONDENTJUDGE:
MOORE J
DATE OF ORDER:
30 JUNE 1998
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
The application be adjourned until 9.15am on 3 July 1998 to enable the parties to prepare short minutes to give effect to the reasons for judgment.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG550 of 1998
BETWEEN:
J H FENNER & CO LIMITED
FIRST APPLICANTTURNER BELTING LIMITED
SECOND APPLICANTAND:
GULF CONVEYOR SYSTEMS PTY LTD
FIRST RESPONDENTSOUTHERN CONVEYOR ALLIANCE PTY LTD
SECOND RESPONDENTPIT TOP MINING PTY LIMITED T/AS PITTOP
THIRD RESPONDENTCOLIN WILLIAM BENJAMIN
FOURTH RESPONDENTDONNA LEE BENJAMIN
FIFTH RESPONDENTGEOFFREY EDWARD HAMMOND
SIXTH RESPONDENTRONALD PETER JAMES SLATTERY
SEVENTH RESPONDENTSTEPHEN O'DONNELL
EIGHT RESPONDENT
JUDGE:
MOORE J
DATE:
30 JUNE 1998
PLACE:
SYDNEY
REASONS FOR JUDGMENT
Introduction
On 1 April 1992 a distribution agreement was entered into by TBA Belting Limited (“TBA”) and Gulf Conveyor Systems Pty Ltd (“Gulf”) (“the distribution agreement”). TBA was based in the United Kingdom and manufactured conveyor belts used in the mining industry. The distribution agreement conferred on Gulf an exclusive right to distribute in Australia (and some other countries) TBA’s self extinguishing conveyor belting and related material. On 19 September 1995 TBA and its parent, T&N PLC, entered an agreement (“the sale agreement”) with J H Fenner & Co Limited (“Fenner (UK)”) and its parent, Fenner PLC in which Fenner (UK) acquired the belt manufacturing business of TBA. The sale was completed on 3 December 1995. Fenner (UK) was also a manufacturer, based in the United Kingdom, of conveyor belts. Fenner (UK) and Turner Belting Limited (“TBL”) have commenced proceedings in this Court against Gulf alleging it has, since the sale of the belt manufacturing business of TBA, engaged in conduct involving both a breach of the distribution agreement and a contravention of s 52 of the Trade Practices Act 1974. This judgment deals with an application by Fenner (UK) and TBL for interlocutory orders including orders temporarily restraining Gulf and associated interests from engaging in the sale of a particular type of conveyor belting in the Australian market other than through Fenner (UK) and TBL. In doing so they are seeking to enforce a negative covenant in the distribution agreement.
The agreements
The sale agreement provided that Fenner (UK) would acquire the benefits of TBA under any business contracts, as defined, which included the distribution agreement. In relation to such a contract TBA agreed to use its best endeavours to procure the novation or assignment of the contract if it was necessary. Whether novation was necessary in relation to the distribution agreement and whether it was ever assigned are in issue. The sale agreement also provided that unless and until such an agreement had been novated or assigned, TBA would continue its corporate existence and the contract would be performed on its behalf by Fenner (UK). TBL is a wholly owned subsidiary of Fenner (UK) and became, in large measure, the corporate vehicle by which Fenner (UK) gave effect to its role as sub-contractor for TBA providing belting to Gulf. The sale agreement also involved the transfer to Fenner (UK) of all industrial and intellectual property rights of TBA. I will refer to the sale agreement in more detail later.
Clause 5 of the distribution agreement identified one of Gulf’s obligations in the following terms:
5. Gulf will use its best endeavours to promote and extend the sale of the Product in the Territory, at all times making it known that they are the Products of the Company. During the continuance in force of this Agreement Gulf shall not directly or indirectly sell or buy or be interested in or concerned with the production, processing, purchase or sale of goods which the Company reasonably believes do or are likely to compete with the Products (“Competing Products”) save as follows:
(a)if TBA shall be unable to satisfy Gulf’s reasonable demands for delivery dates and/or quantities of the Products for any one or more applications Gulf shall be entitled to purchase and resell Competing Products for such application(s) only, until such time as TBA shall again be able to satisfy Gulf’s such reasonable demands;
(b)Gulf shall in any event be able to promote and sell belting products for applications for which the Products are not suitable or appropriate.
“Products” are defined as “self extinguishing conveyor belting and the materials for the vulcanization thereof”.
The distribution agreement provided that sales were to be made in accordance with the conditions of sale which were an appendix to the agreement and relevantly provided:
(b)The Company operates a policy of continuous review/improvement. The right is reserved to alter without notice the formulation of the goods. Such alteration shall be deemed not to change the description of the goods ordered.
The distribution agreement also dealt with confidentiality and provided in clause 9:
Neither party hereto shall divulge to any third party any confidential information which it may receive relating to the other’s products, affairs or business, either during the continuance in force of this agreement or at any subsequent time. The said obligations of confidentiality shall not, however, apply to any information:
(a)which one party can show was in its possession prior to receipt from the other party;
(b)which is in, or subsequently enters, the public domain (other than by breach of the receiving party’s obligations under this clause);
(c)which one party hereto obtains from a third party not under any obligations of confidentiality to the other party hereto in respect of same.
Events leading to the litigation
I will shortly describe the events leading to the litigation as they appear to emerge from the material before the Court. As these are interlocutory proceedings brought on with some urgency, there are many factual issues that remain untested or fully explored.
In order to understand the background it is desirable to say something about the products to which the litigation relates. TBA produced belting at a plant in Wigan. The production process involved the application of a PVC coating onto a solid woven carcass. TBA was able to produce differential covers, that is, the coating on one side was thicker than the coating on the other. The thicker side was the outer side which would carry the ore. The thinner side was the underside of the belting. The covers of TBA belting were characteristically blue in colour and were smooth. The application of the covers involved a process of heating and pressing. For some time after the sale of TBA’s manufacturing business, the Wigan plant continued to manufacture belting. However the plant was closed in two stages. The weaving plant closed in October 1996 and by July 1997 the entire plant had closed. Thereafter any belting which might be provided to Gulf under the distribution agreement would have to have been manufactured at a plant operated by Fenner (UK) in Hull.
Prior to the execution of the distribution agreement in April 1992 and from 1988, Gulf had sold in Australia solid woven belting manufactured by TBA. That arrangement and the distribution agreement arose against a background in which Mr Colin Benjamin, managing director of Gulf, had been seeking an opportunity for Gulf to develop a business marketing belting and providing technical support services in the mining industry in Australia. At that time the market was supplied by Fenner Australia Pty Ltd (“Fenner (Australia)”) which was and is part of the Fenner PLC group. Fenner PLC is the ultimate holding company of Fenner (Australia). It is not a subsidiary of Fenner (UK). I will ordinarily use the expression “Fenner PLC group” to describe Fenner PLC and Fenner (UK) (including its subsidiary TBL) where it is not necessary to distinguish between them. The other company supplying the underground coal mining industry was Apex Belting Australia. In an affidavit read in these interlocutory proceedings Benjamin said that in 1986 Gulf sought an alternative supply of solid woven belting for the Australian market. It initially sought out a competitor of the Fenner PLC group and at the time there were two competitors manufacturing in the United Kingdom. One was Scandura and the other was TBA. Gulf initially marketed Scandura belting but Scandura decided to create an alliance with Apex Belting. In the result, Gulf sought out another supplier and turned to TBA. As mentioned earlier, it commenced selling TBA’s belting in 1988. The manufacturing process of TBA differed from that used by Fenner (UK) and Fenner (Australia) and Scandura in that the Fenner companies and Scandura finished the PVC covered belting by a dipping process unlike the pressing process used by TBA. Benjamin said that he and others from Gulf were involved in consulting with TBA to improve the application of their technology with a view to creating a heavier PVC cover with a longer life. Benjamin said that, in the result, the heavier belting provided a technical advantage. Gulf was able to exploit that advantage in the market and establish a significant market share of the underground coal mining solid woven belting business. Not only did TBA have the technology to enable the creation of thicker covers but also the technology to produce covers of uneven thickness.
By mid 1995 Fenner (Australia) supplied 65% of the solid woven belting in the underground coal mining market, Apex Belting Australia sold approximately 10%, and Gulf approximately 25%. Benjamin said that Gulf’s market was generally at the premium end as they had found it difficult to compete against other manufacturers, including the Fenner companies, on price. Gulf, however, was able to create product differentiation with the belting it sold.
Benjamin was told of the sale agreement in a phone call on 20 September 1995 from Mr Graham Hornby, the managing director of TBA. Benjamin was asked to fly to the United Kingdom immediately which he did. There he was told by Hornby that the effect of the acquisition was to transfer the distribution agreement to Fenner but that this could not be done without Gulf’s consent unless the distribution agreement was novated. Benjamin replied that Gulf would not be novating the agreement until they could sort out the whole relationship between the Fenner PLC group and Fenner (Australia).
In a trip report prepared by Benjamin at the time, he noted:
Gulf does not see its current arrangements with TBA as transferable simply because Fenner have existing operation in Australia and it does not make sense nor would it be sustainable if Gulf through TBA were the vehicle that restrained Fenner’s overall profits through competing with Fenner in Australia. There must be a new agreement with agreed common sales and marketing strategies.
He also noted:
The current agreement, it was agreed, is unworkable given that it is not viable for Gulf to compete with Fenner when the two of us dominate the market. The new agreement, it was agreed would
- continue with both product brands;
-cover an agreed joint sales/marketing operation that satisfied both parties;
-must minimise profits without reducing joint market dominance, Must also grow the market.
Shortly after the trip, on 6 October 1995, Hornby wrote to Benjamin referring to the trip and confirming some of the details of the agreement between TBA and the Fenner PLC group. He said:
Subject to any necessary third party consents, TBA has agreed to transfer to Fenner the contracts of the conveyor belting business. These contracts include the distribution agreement of the 1st April 1992 between TBA and Gulf. In relation to those contracts where third party consent is required, unless and until that consent is obtained, TBA and Fenner have agreed the following:-
1. To endeavour to obtain such consents;
2. That TBA will maintain its corporate existence;
3.That Fenner will perform TBA’s obligations under any such contract upon the same terms and conditions.
The effect of the above is that TBA would remain party to such contracts pending the obtaining of third party consents to transfer, and Fenner would perform TBA’s obligations as sub-contractor for TBA. I hope this clarifies the position for you.
There was no suggestion in this letter that the sale agreement effected an assignment of the distribution agreement from TBA to Fenner (UK). This letter was not received by Benjamin until 20 December 1995.
In early December 1995 Mr Colin Axford, International Sales Manager of the Fenner PLC group, visited Australia and met Benjamin. The meeting was at the offices of Fenner (Australia) and involved Mr Ron Hill who was the general manager of Fenner (Australia). Before that meeting, Benjamin had sent a fax to Hornby indicating he was prepared to meet Axford though indicated that Gulf would rely on its rights under the distribution agreement unless a suitable commercial solution could be reached.
On 4 January 1996, Benjamin wrote to Axford setting out what he perceived to be a range of issues that needed to be resolved. Some of what he stated concerned potential problems involving Gulf and Fenner (Australia) operating in the same market. He noted:
New projects are logical points of conflict where a large volume of business is to be had. I do not mind maintaining the presence of a ‘Chinese Wall’ providing Gulf’s position is not artificially and negatively manipulated in the UK..
Benjamin also stated that while he was confident that in time all issues could be positively resolved:
I am not prepared to novate Gulf’s agreement with T&N re our distribution rights such that it can be effectively transferred to Fenner until we have confronted at least some of these issues and resolved same.
Benjamin faxed a copy of this letter to Hornby on 10 January 1996. Hornby replied with a letter dated 18 January 1996 to Benjamin. He said:
My letter of the 6th October 1995 points out that the main contract between us i.e. the distribution agreement of the 1st April 1992 between TBA and Gulf, is a contract that TBA has agreed to transfer to Fenner and Fenner will perform TBA’s obligations on the same terms and conditions. This allows you, through this distribution agreement, to still follow the route we discussed to purchase belting stock with an additional 30 days credit over and above the normal trading terms.
After the sale of TBA’s manufacturing business a total of 14,900 metres of belting was dispatched to Gulf in relation to orders received before the sale. This occurred in the period April 1996 to February 1997. In relation to orders placed after the sale, a total of 22,700 metres of belting was dispatched to Gulf in the following quantities:
Length
(metres)Month 1,400 April 1996 2,000 May 1996 1,000 April 1996 260 July 1996 2,000 July 1996 160 August 1996 2,000 August 1996 1,400 August 1996* 1,500 September-October 1996 2,600 December 1996-January 1997 4,800 March 1997* 1,800 May 1997* 1,800 January 1998 (a warranty replacement for the May 1997 consignment)
The asterisk signifies a warranty claim arose in relation to that consignment. It was, in some respect, defective belting. The last purchase order was placed by Gulf on 3 April 1997 for the 1,800 metres of belting dispatched in May 1997.
In August 1996, Mr John Cartwright of TBL wrote to Benjamin informing him of price increases for certain belting. This led to a response from Benjamin by fax dated 13 August 1996 in which he said:
John, we agreed in March that the substantial price increases of February would be accepted by Gulf on the basis these prices remain valid until December 31st. This agreement was reached during discussions between us on March 22nd. Furthermore we have a formal agreement in place that while not novated, remains the basis of our trading arrangements. Should you wish to change our trading terms we must agree to change the formal agreement between us. Frankly, I am concerned and disappointed that matters of such substance have been handled in this way. Simply we reject the price increases and the change in trading terms. Instead we seek the opportunity to discuss both matters with you at your earliest convenience.
However by October 1996 Gulf had decided to accept the new price structure and on 3 October 1996 Mr Andrew Burleigh, who was to become general manager of Gulf, sent a fax to Cartwright signifying that agreement. Burleigh said:
These issues of price increases and trading terms in our correspondence with TBL/Fenner raise wider issues concerning our Distribution Agreement with TBA Belting Limited. In Graham Hornby’s letter of October 6, 1995 (which was not received by us until December 1995), we were informed that TBA had agreed to transfer to Fenner, the contracts for the Conveyor Belting business, including the Distribution Agreement relating to Gulf. In the meantime, we understood that Fenner would perform TBA’s obligations as sub-contractor.
We would be grateful if you would clarify the current position as to our contract with TBA Belting Limited so that we know where we stand. In addition, we are distinctly uncomfortable with the possibility that Fenner may be privy to information about our business activities. We have no objection to sharing and growing our activities in Australia with Fenner, providing we have a clear and defined understanding of Fenner’s objectives, assuming these are not in conflict with Gulf’s. We would be grateful if you would address these issues and clarify what steps, you consider, should be taken.
I believe we should plan to sit down and thrash these issues out in the near term as we do see major opportunities for us and Fenner but need the reassurance that there is a mutual commitment.
This was responded to by Axford who sent a facsimile on 11 October 1996 which included the following:
The contractual situation remains with it passed to us by TBA but not yet novated by yourselves. Our intent has always been to continue with it as it stands.
The fax went on to refer to concerns that had been raised by Benjamin about the operation of the market in Australia. It included a reference to a request for information that had been made by Hill of Fenner (Australia). Of this Axford said:
Ron didn’t ask for a 4/2 price until you had indicated you were ‘way out on price’. I have no knowledge yet that Fenner has the job and believe that you are premature.
This concerns a matter I will refer to later, namely a perception on Benjamin’s part that Fenner (Australia) was competing in the Australian market by supplying product that had, until then, only been supplied in Australia by Gulf. Gulf’s place in the market had resulted from it being able to supply heavier PVC covered belting with differential thicknesses which TBA could manufacture and others could not. The “4/2” is a reference to belting with covers of 4mm on the outer side and 2mm on the under side.
The letter from Axford to Burleigh prompted a letter from Benjamin dated 29 October 1996 to Mr Brian Heckford who was the managing director of the Hull plant of Fenner (UK). In it Benjamin stated:
Uneven PVC covers eg. 4+2, 3+1.5 are the only unique items of differentiation from TBL to Fenner. The fact is Colin is quoting Fenner (Australia) heavy PVC and differential PVC covers, thus totally negating this differential and thereby destroying the logic behind our relationship.
The reference to Colin is to Axford. I have gained the impression that it is at about this time that what ultimately proved to be a marked deterioration in the relationship between Gulf and Fenner (UK) commenced. Nonetheless, at the end of October 1996, Benjamin was sent a letter by Mr Nick Harrison, managing director of the Fenner PLC group, in which Harrison indicated Fenner intended to have a long term relationship with Gulf in Australia and Gulf would be part of Fenner’s future in the Pacific rim.
At about this time correspondence was sent to Gulf concerning future approval of belting manufactured on behalf of TBL. In New South Wales, conveyor belting cannot be used in underground coal mines unless it is approved: see Coal Mines Regulation Act 1982 (NSW). The system of approval involves an assessment of the belting on several grounds. In 1996 the prevailing system of approval was described as “series 200 approval” though those approvals were to expire in September 1997. An approval needed to be held by an Australian company and those in relation to TBA were held by Gulf. It was necessary for samples of belt to be submitted for testing so as to gain approval under the new regime entitled “series 400 approvals” which was to operate after September 1997.
I return to the dialogue between Gulf and the Fenner PLC group. On 27 November 1996 Axford sent Benjamin a facsimile. He foreshadowed a visit to Australia. He indicated he would be meeting with Hill and Benjamin both separately and together. Axford said:
If Fenner is excluded from offering smooth covers, etc., it restricts any development work being made on our product, which is on-going process. We can already achieve covers virtually as smooth as TBL off our dipping process and this was a relatively simple development, long understood.
It appears Axford was rejecting the suggestion that Fenner (Australia), as opposed to TBL through Gulf, should be precluded from selling smooth covered belting in the Australian market. Axford went on to propose a means of resolving potential differences between Fenner (Australia) and Gulf and made the following suggestion:
How you approach the market would be for you to jointly agree with Ron, but our preference would be for the market to be split perhaps coal/non-coal, with Ron’s people being able to pursue business in coal, their natural marketplace, leaving you free to continue with Imas there, a business in which you have invested a lot of time and effort.
The reference to IMAS is a Greek company whose product Gulf had distributed for some time. It is not product of the type this litigation relates to in that it is not PVC coated solid woven belting. The reference to Ron is Hill. The import of Axford’s observations was that Fenner (Australia) would compete with Gulf and provide any product the Fenner PLC Group could manufacture but on the basis that there would be an opportunity for Gulf to pursue markets with Fenner PLC group products other than in the coal mining industry. I should refer to a document dated some months earlier, 13 June 1996, from Hill to Heckford. It concerns Hill’s assessment of Gulf’s position in the market in Australia. Hill said:
Gulf Rubber are distributors of TBA Belting, end of relationship. From that point, we are fierce competitors in both belt sales and splicing.
Gulf are also in a unique position, in that they push hard for IMAS ply belt sales, but when, through our efforts the decision is to purchase solid woven, Gulf change hats and offer T.B.A.
Gulf have taken splicing work from us in Queensland by offering ridiculously low prices at both Gordonston and Oakey Creek, and we know that they are actively campaigning with Gordonston management to change from solid woven to ply belt.
Nick Harrison told me that whilst Fenner needs sales of T.B.A. in Australia, the amount of metres would be manipulatively limited so as not to encroach on our own homemade sales.
Apart from T.B.A. belt sales, we must not encourage our competitor to grow his business, because eventually it will harm ours.
(emphasis added)
This letter provides some support for the view that the concern of Benjamin about market manipulation referred to in his letter of 4 January 1996 was emerging as one of substance. There was nothing in the evidence to suggest that the letter from Hill to Heckford was met by a response, either written or oral, disabusing Hill of what he believed to be the position arising from a conversation with Harrison.
Axford visited Australia in December 1996 and met Benjamin and Burleigh on 17 December 1996. He was informed that Gulf had been experiencing what Benjamin described in minutes of the meeting as “spoiling tactics from Fenner (Australia)”. Gulf proposed at the meeting to join forces with Fenner whereby Fenner would manufacture and Gulf would market the product. While it is not entirely clear, this appears to be a reference to manufacturing both by Fenner (UK) and Fenner (Australia).
The present general manager of TBL gave evidence that in January 1997 Fenner (UK) was advised by Gulf that new approvals would have to be sought in respect of the belting sold by Gulf. On 15 January 1997 Gulf issued purchase orders for the 4,800 metres of belt which was dispatched in March 1997. However the difficulties in the relationship between Gulf and the Fenner PLC group continued. By fax dated 21 January 1997 Burleigh wrote to Axford about a tender Gulf was then engaged in. Burleigh expressed his belief that Fenner (Australia) had been talking to the same customer trying to undercut Gulf on belting of thick and uneven covers. Burleigh said:
I express my concern that the co-operation that we have spoken of and the wish to depart from price based competition does not appear to have been accepted at Fenner Australia. I also express the concern that for Fenner Australia to offer smooth and uneven covers, not ruled out by Peter, goes against the essence of our distributor agreement with TBA Belting Limited.
Peter was a reference to Mr Peter Moulden who was an employee of Fenner (Australia). Axford responded with a facsimile the same day saying that Fenner (Australia) was not quoting on unequal covers on PVC covered belting and had no intention of doing so.
On 11 February 1997 a fax was sent by Cartwright to Gulf indicating that samples of two types of PVC covered belting were being prepared for approval purposes. The letter indicated that it was hoped the samples would be dispatched in the week commencing 24 February 1997. This was confirmed in a fax of 26 February 1997 from TBL to Gulf. The belting was tested and approval given by letter dated 21 April 1997 to Gulf from the Workcover Authority of New South Wales. The approval was conditional in the sense that further testing had to be done. It never was. At the testing was a representative of the Fenner PLC group, Mr Geoffrey Normanton. In the period April, May, June and July 1997 Gulf placed its last order with TBA (3 April 1997) and correspondence passed between Gulf and the Fenner PLC group about deficiencies in the quality of belting delivered to the Appin colliery, the Mooney colliery, and the Angus Place colliery.
On 8 September 1997 Benjamin met in Australia with Harrison and Mr Bob Gardiner who was the regional director for Australia and the South Pacific for the Fenner PLC group. What transpired at this meeting must be viewed in the context of events in August 1997 to which I will shortly refer. Harrison indicated that the Fenner PLC group had an objective to become the largest conveyor belt manufacturer in the world. This matter was discussed. Local issues were then discussed. Benjamin told Harrison that the TBL product name had been substantially destroyed at considerable cost to Gulf. Benjamin proposed, in essence, that Gulf be involved in the sale of, it appears, all Fenner PLC group products. Harrison responded by indicating that it was important Gulf continue to sell TBL belting as there was a need for a perception of competition. Benjamin responded by saying Gulf was not interested in TBL belting and the meeting turned to discuss the history of Gulf’s relationship and how it might, in the future, be resolved.
The events in August 1997 I just alluded to concerned a trip Benjamin took to France early that month. Benjamin there met with representatives of Depreux Systems S.A. (“Depreux”) which is a French manufacturer of conveyor belting. Benjamin produced a report of his trip dated 13 August 1997. In it he detailed discussions he had with the representatives of Depreux and his impressions of the Depreux manufacturing processes, which he inspected, and their product. In my opinion, it is strongly arguable that the notes made by Benjamin evidence a comparatively well formed intention on his part that Gulf would assume the role of distributor for Depreux in Australia. For example, the following appears in his notes:
The agency is ours, no doubts. I will send a copy of the TBL agreement suitably modified to form a formal basis, but both of us agreed paper did not make agreement, it was communication, commitment and honesty and an acceptance by both of us if we did not both make money out of it - it was not worth doing.
He also noted:
Agreed we must take a very careful, considered approach so as not to alert Fenner until we are fully ready to go after them. Hence black covers initial promotions etc.
His note concludes with the following paragraph:
Overall, impression was very positive, the product looks very good and is no doubt viable at current exchange rates against TBL. If a JV goes ahead in China then we could also attack the bottom end of the market. I have no real expectations of Gardiner of Fenner offering us any great deal in September/October that secures a relationship with Fenner that is medium/long term viable option for Gulf hence this alternate is not only attractive, but most probably an essential direction Gulf must take. We need to think through how we handle this as we need to ensure we preserve the current (albeit tenuous) Fenner relationship as long as possible so they do not react aggressively and hence upset any of our plans for BHP Coal or Cyprus. We also now have leverage to give Cyprus a very good deal, so we must act positively in this direction. This means, I should enter into negotiations in September/October with Gardiner on the most positive basis possible, but remain firm on our need for a commercially attractive and viable relationship. Having Depreux deal allows me to be firm, without being too aggressive, hence when (and I expect this will be the case) Fenner fail to meet our needs we can state we had to act to protect ourselves given Fenner’s acquisition of Scandura. Ideally, we need to still have access to reasonable pricing out of Fenner and we should not close the door nor act aggressively such that we do not maintain a wide ranges of options. We must remember it will take us 18/24 months to prove to the market that Depreux is quality.
It is relatively clear that what Benjamin had in mind was retaining a role selling TBL belting in the Australian market though on the basis that the relationship with the Fenner PLC group would gradually be replaced by a relationship with Depreux once it was established in the market.
That this was his approach is confirmed in a memorandum he sent on 12 August 1997 to Mr John Masters who was an engineer employed by BHP Engineering and an expert in conveyor belting. In that memorandum Benjamin said:
Gulf at this time, retains the representation from Fenner of the TBL product range. We are, however, so concerned that we are actively looking at alternatives, particularly after recent experiences on product quality. We need, however, to keep this activity confidential as to do otherwise will prejudice our warranty claims on behalf of our customers and prejudice Gulf commercially should any of the alternatives prove not to have products that meet the quality needs of our market.
The facsimile included a request that Masters undertake testing of the Depreux belting.
It is unnecessary to detail events in the latter part of 1997. They may be summarised in this way. Notwithstanding the intimation at the meeting in September 1997 between Benjamin and Harrison that Gulf would not distribute TBL belting (that is, surrogate TBA belting supplied by TBL), Gulf continued to act as if it was the distributor of belting supplied by TBL in Australia albeit on a limited basis. In October 1997 samples of one line of belting supplied by TBL was sent to Gulf for the purposes of submission for testing though it was not submitted. In late November 1997 Gulf sought a quote from TBL (though it was addressed to TBA) for the provision of PVC covered belting and on 20 October 1997 Burleigh sent a fax to Heckford and Cartwright traversing the quality problems that Gulf had experienced but concluded on a basis that implied Gulf was interested in continuing a relationship with the Fenner PLC group. However in a conversation between Benjamin and Heckford in November 1997, Benjamin repeated the position he had adopted with Harrison in September, namely Gulf was not interested in TBL product and wanted to deal only with Fenner belting.
While this somewhat ambivalent relationship between Gulf and the Fenner PLC group continued in the latter part of 1997, steps were being taken to enable the sale of Depreux belting on the Australia market. To this end a company, Southern Conveyor Alliance Pty Limited (“Southern Conveyor”) was incorporated. On 8 December 1997, a distribution agreement was entered into between Gulf, Depreux and Southern Conveyor. Southern Conveyor was to act as the distributor of Depreux belting in Australia, New Zealand and specified Asian countries. Gulf owns 50% of the shares in Southern Conveyor.
Many of the events in the first half of 1998 concern matters which I need not detail. Many would be relevant to the question of whether the applicants had delayed in bringing these proceedings which, as will be apparent later in this judgment, is not a matter I perceive as being of great moment.
Four matters occurring in 1998 should, however, be mentioned. The first is that notwithstanding a number of facsimiles in late 1997 and January 1998, it was not until 3 February 1998 that Gulf indicated by facsimile to Cartwright that there may be some problems with the approvals. In fact, the conditional approvals given in April 1997 were not pursued by Gulf nor were the samples provided in October 1997 submitted for testing. Moreover the facsimile of 3 February 1998 should be approached with some caution given that at the end of February 1998 Cartwright commenced employment with Depreux. The contents of the facsimile were not discovered by Wilkinson until May 1998.
The second is that on 19 March 1998 Gulf and TBA entered an agreement under which TBA paid Gulf $50,000 and Gulf agreed:
(To) release TBA in full and final settlement from all and any of the obligations and liabilities of TBA contained, mentioned or referred to in the Agreement whether past, present or future and indemnifies TBA against all damages, actions, proceedings, costs, claims, demands, expenses and liabilities whatsoever arising from such obligations and liabilities set out in the Agreement.
The third matter is correspondence from Gulf to T&N PLC dated 6 February 1998. Benjamin wrote:
RE: T & N/GULF DISTRIBUTION AGREEMENT
At the time of Fenner’s purchase of the TBA assets from your company, we were asked to novate our distribution agreement endorsing the change of ownership.
We had very positive verbal discussions with Fenner but declined to novate this agreement until we had written confirmation of Fenner’s intentions towards Gulf and a degree of comfort that it was delivered as verbally promised. The reality has been less than satisfactory from our viewpoint, and we are therefore writing to you to advise you that we regard our distribution arrangement as having been abrogated by Fenner/T&N and that we do believe T&N have some obligations to Gulf as a result of the abrogation. We have already written to you in regard to resolving the Capcoal issue and trust this matter can be settled. We also hope that should Gulf suffer financially from any inadequate resolution of some of the outstanding issues that remain between Fenner and ourselves, we can rely on T&N to assist, given that you persuaded us into this arrangement.
In writing to you at this moment, I am alerting you only to what could happen, albeit we are using our every endeavour to resolve all issues amicably and professionally.
A facsimile letter to similar effect was sent by Benjamin to Heckford at this time in which he said:
We believe it is in both our best interests to accept this reality and to accept the current agreement is null and void.
Benjamin did, however, go on to note that in writing that facsimile he was not closing any doors.
The fourth matter was that a deed was executed on 29 May 1998 in which TBA assigned the distribution agreement to Fenner (UK).
The strength of the applicants’ case
Central to the case of the applicants is that Gulf breached the distribution agreement by failing to pursue the commercial interests of TBA by not securing series 400 approvals and by participating in an arrangement for the distribution of the product of a competitor, namely Depreux. In order to ascertain whether there is a serious question to be tried on this issue it is necessary to consider a number of discrete though ultimately related issues.
It is to be recalled that the applicants in these proceedings are Fenner (UK) and TBL. TBA is not a party. The applicants submitted that the distribution agreement was assigned to Fenner (UK), and thus the right to enforce its terms, by either the sale agreement or the assignment effected in May 1998. Earlier in this judgment I referred to a term of the sale agreement which concerned contracts where there could be no assignment without the agreement of the other party or the novation of the contract by them. As is apparent from the evidence, both Gulf and those representing the Fenner PLC group proceeded on the assumption that novation was necessary and the distribution agreement could not be assigned. Gulf submitted this gave rise to an estoppel which is a matter I refer to shortly.
However the applicants submitted that the sale agreement itself effected an assignment of the distribution agreement. This was said to arise by operation of clause 18.2 of the sale agreement which provided:
The Vendors undertake with effect from the Completion Date to assign to the order of the Purchaser or to procure the assignment to the order of the Purchaser all the Business Contracts and the Minor Contracts which are capable of assignment without the consent of other parties.
This provision, in terms, appears to be nothing more than an undertaking or promise to take some further step, namely to assign a contract to which clause 18.2 applied. It may be accepted, however, that clause 18.3 referred to a class of contract in relation to which the sale agreement did not constitute an assignment. The structure of the sale agreement suggests that clause 18.3 concerned a class of contract to which clause 18.2 did not apply. That is, clause 18.2 concerned contracts which were assigned by the sale agreement and clause 18.3 contracts which were not. However, it is to be recalled that steps were taken in May 1998 to effect, by deed executed on 29 May 1998, an assignment of the distribution agreement from TBA to Fenner (UK). Thus if the distribution agreement was capable of assignment without Gulf’s consent then it was arguably effected by the sale agreement or actually effected by the assignment on 29 May 1998.
However Gulf put in issue the assignment on two bases. The first was that the distribution agreement is a contract of a character which renders it unassignable in the absence of Gulf’s consent and the novation of the agreement. Gulf relied on the principle that a personal contract cannot be assigned and referred to Kemp v Baerselman (1906) 2 KB 604. In that case the Court of Appeal decided that an agreement to supply eggs to a cake manufacturer was not assignable to the purchaser, a related corporation, of the manufacturer’s cake making business. The agreement was one in which the manufacturer had agreed not to buy eggs elsewhere. That aspect of the contractual arrangements was viewed by each member of the Court of Appeal as giving it a sufficiently personal character as to render it unassignable. Gulf pointed to similar features in the distribution agreement, namely that Gulf’s rights in Australia were exclusive rights and its obligations were likewise confined to promoting only the business of TBA in relation to products to which the distribution agreement related.
The applicants submitted that the distribution agreement was assignable on several bases. One was that the distribution agreement expressly dealt with assignment by Gulf in clause 19 which provided:
Gulf shall not without the previous consent in writing of the Company transfer this Agreement or delegate its rights and powers hereunder to any other person, firm or company; but this shall not prevent Gulf from employing others previously notified in writing to the Company to act as subdistributors on terms agreed by the Company provided that every such employment shall terminate (and be expressed to terminate) automatically on termination of this Agreement and that Gulf shall always be responsible for the acts, defaults and omissions of anyone so employed.
It was submitted that, by implication, assignment by TBA was contemplated by the parties. I doubt that such a term would be implied: see BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 and Breen v Williams (1996) 186 CLR 71. It is comparatively clear from the evidence of Benjamin that Gulf elected to enter into the agreement with TBA having regard to TBA’s position in the market generally, the characteristics of the belting it produced and the potential benefits of being able to distribute its products in the Australian market. It is improbable that Gulf would have agreed to a term permitting assignment by TBA had the parties turned their minds to it. Moreover it would not have been necessary to give business efficacy to the distribution agreement. The applicants also pointed to one of the conditions of sale which, by operation of clause 3 of the distribution agreement, formed part of that agreement. Clause 11 of the conditions of sale dealt with assignment though, in my opinion, it is comparatively clear that it related only to the assignment of any particular sale agreement. That is, TBA reserved the right to have another manufacturer satisfy any particular sale contract. That clause was not intended to confer a right to assign the distribution agreement in its entirety.
The applicants also submitted that the benefit of the distribution agreement was assignable by TBA and reference was made to para 19-044/045 of Chitty on Contracts - General Principles, 27th ed and the discussion about the approach adopted by Megarry VC in Tito v Waddell (No 2) (1977) Ch 106. It may be accepted that the law in Australia concerning the benefit/burden dichotomy is not yet settled: see Konstas v Southern Cross Pumps & Irrigation Pty Ltd, 3 July 1996, unreported, Federal Court of Australia, Tamberlin J. But it remains strongly arguable that, in relation to personal contracts, the benefit is not assignable. So much is apparent from Kemp v Baerselman at 608 per Lord Alverston CJ, at 609 per Sir Gorrell Barnes and at 611 per Farwell LJ. In my opinion, the argument that there has been an assignment of the distribution agreement by TBA to Fenner (UK) is not a strong one. It is central to the applicants’ case as presently framed. Moreover there is an argument of some substance that even if it could have been and was assigned, the Fenner PLC group led Gulf to believe that the distribution agreement with TBA remained on foot and the involvement of Fenner (UK) and TBL was to discharge the contractual obligations of TBA as sub-contractors. If Gulf acted to its detriment because of that representation then an estoppel may arise: see e.g. Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387.
Gulf submitted that, in any event, the distribution agreement had been brought to an end. Reference was made to both the letter of 6 February 1998 and the variation agreement of 19 March 1998. However neither of these documents, in my opinion, presently appear to have been directed to the termination of the distribution agreement which expressly provided, in clauses 22 to 24, for the manner of termination. A related issue was raised by Gulf, namely that the distribution agreement concerned the distribution of belting manufactured by TBA. At either the time the sale agreement was completed, it was submitted, or some time after that no belting was available that could be characterised as belting manufactured by TBA. I doubt that this is correct as it relates to the time of sale. Upon completion of the sale, production of belting continued at least for a short period at the Wigan plant albeit under Fenner (UK) management in, I apprehend, much the same way as it had before the sale. This submission, as it concerned changes later made to the belting, involves a consideration of the technical differences and similarities between the belting that had been manufactured by TBA prior to the sale of its business and that manufactured by Fenner (UK) after the acquisition of that business at the Wigan plant, at least after a period of time, and subsequently at the Hull plant. I refer to this matter again shortly in a slightly different context.
I now turn to consider whether the material supports a conclusion that Gulf breached the distribution agreement by failing to pursue the 400 series approvals and by participating in the creation of distribution arrangements for Depreux belting. I earlier set out the relevant parts of clause 5 of the distribution agreement. Gulf contended that the negative covenant in clause 5 only related to products that TBA reasonably believed were likely to compete with its own product. It was contended that no relevant belief had been formed or could have been formed because TBA ceased manufacturing belting on the sale of its business in December 1995 and, moreover, the character of the belting later changed. I view this as raising what might prove to be one of the more difficult factual issues in the proceedings and one I touched upon earlier. The resolution of this issue depends, in part, on the assessment of the physical and technical attributes of the belting that had been manufactured by TBA before the sale of its manufacturing business and the physical and technical characteristics of the belting manufactured by Fenner (UK) initially at the Wigan plant and subsequently at the Hull plant. In my opinion, it is not an issue I need to consider in detail at this stage of the proceedings. I say that because whatever view may ultimately be taken about the changes in the character of the belting, it is clear from the evidence that for a period after the sale Gulf acted as if the belting being supplied by TBL as TBA belting and manufactured by Fenner (UK) was being provided in accordance with the distribution agreement. Both TBL and Fenner (UK) were led to believe that this was the basis upon which they were continuing to deal with Gulf. That view is supported by the Benjamin fax of 13 August 1996 and the Burleigh fax of 3 October 1996. The applicants submitted that in these circumstances Gulf was estopped from contending that the distribution agreement had not and did not apply to the dealings between Gulf on the one hand and Fenner (UK) and TBL on the other acting as sub-contractors for TBA. Arguably this is correct.
In my opinion, there is an arguable case that Gulf breached the distribution agreement in relation to both the submission of the samples for testing and the development of the distribution arrangements for Depreux belting. However it must be said that in relation to the testing, Fenner (UK) and TBL were less than assiduous in pursuing the matter in the middle of 1997 in circumstances where Gulf was making plain its disinterest, at its lowest, in continuing to distribute in the Australian market belting provided by TBL. In my opinion, had Fenner (UK) or TBL been acutely interested in securing the 400 series approval, it could be expected TBL would have paid greater attention to what was happening to secure that approval given the existence of the environment that I have earlier described.
In addition to seeking injunctive relief arising from the breach of the distribution agreement, the applicants submitted that injunctive relief should issue because of the use that was being made by the respondents of confidential information obtained by Gulf as distributor of TBA and later TBL belting. The legal foundation for the injunction is the so-called “springboard doctrine” that enables the grant of an injunction to restrain a party who has obtained an unfair advantage by unlawful use of confidential information: see Roger Bullivant v Ellis (1987) FSR 172 and also British Franco Electric Pty Ltd v Dowling Plastics Pty Ltd (1981) 1 NSWLR 448, United Surgical Corporation v Hospital Products International Pty Ltd (1982) 2 NSWLR 766 at 815; Peters American Delicacy Company Ltd v Birchmeier (1940) 40 SR(NSW) 223, Sanderson Motors (Sales) Pty Ltd v Yorkstar Motors Pty Ltd (1983) 1 NSWLR 513, Beltech Corporation Ltd v Wyborn (1988) 92 FLR 283 and Dart Industries v David Bryar & Associates Pty Ltd (1997) 38 IPR 389.
The applicants pointed to several pieces of information which they said were confidential and had been provided to Gulf. They said, either expressly or impliedly, that the information was being used or had been used by Gulf or Southern Conveyor or interests associated with both companies to advance the interests of Gulf, Southern Conveyor and Depreux at the expense of the applicants. The information related to methods of splicing belting and the specifications of a range of belting provided by TBL as well as information concerning the troughability of Fenner belting (though this information appears to have arisen from Depreux’s experience in the United Kingdom market). However the difficulty confronting the applicants is, in my opinion, that it is not apparent from the material before the Court that Gulf, Southern Conveyor or those associated with them have used or are using knowledge gained from TBA or the Fenner PLC group to advance their position in the market in Australia. Conceivably it is happening in some respects but it is to be remembered that Benjamin and Gulf and those associated with Southern Conveyor have had many years experience in the industry of marketing conveyor belting and providing technical support services. A case has not been made out, in my opinion, based on misuse of confidential information which would justify the granting of an order effectively restraining Gulf and Southern Conveyor and those associated with them from trading in the market in Australia in PVC solid woven belting other than as distributors of belting provided by the Fenner PLC group.
The applicants also sought injunctive relief under s 80 of the Trade Practices Act 1974. They contended that Gulf and interests associated with Gulf had and were likely to engage in conduct which was misleading and deceptive and in contravention of s 52. Two aspects of their conduct were identified. One was conduct said to involve the criticism of belting produced by the Fenner PLC group which was false. The other was representations that Gulf and interests associated with Gulf were able to distribute belting other than belting produced by the Fenner PLC group. That is, Gulf and interests associated with Gulf were free to distribute Depreux belting in competition with belting that might be supplied by the Fenner PLC group.
The difficulty with the first aspect of this submission is that I was not taken to any evidence which satisfies me that any false representations of that type were made or are likely to be made. The second aspect is inextricably linked, in my opinion, with the applicants’ case as it concerns the breach of the distribution agreement. If they are unable to persuade me that the negative covenant in the distribution agreement should be enforced by interlocutory injunctive relief, then there would be no reason of substance, in my opinion, for the grant of statutory injunctive relief based on an arguable contravention of s 52.
The Balance of Convenience
It is necessary to consider where the balance of convenience lies. That involves a consideration of a number of matters including the strength of the applicants’ case. One relevant matter is the conduct of the applicants and whether TBA, through the activities of Fenner (UK) and TBL, has met its obligations under the distribution agreement. For reasons which I will explain shortly, this appears to me to be a significant issue in determining whether interlocutory relief should be granted. It is to be recalled that the distribution agreement established Gulf as the sole distributor of self extinguishing conveyor belting produced by TBA. There is material from which it might ultimately be inferred that the Fenner PLC group were content to maintain the distribution agreement for so long as it suited them and only on terms that suited them. Moreover there is also material from which it might ultimately be inferred that the Fenner PLC group were not particularly rigorous in the application of the agreement in so far as it conferred sole distribution rights on Gulf. I have already set out the letter of 13 June 1996 from Hill to Heckford in which reference is made to the number of metres of TBA sold in Australia being “manipulatively limited”.
A little over a year later Hill, of Fenner (Australia), sent Axford an email dated 7 July 1997 concerning a tender that Fenner (Australia) had to complete. The tender called for belting with 4+2mm PVC covers. Hill posed a number of questions:
Are we/you still making complaint attractive belt at Wigan, or will Gulf be buying dipped belt as we do
If Wigan is out, as I am led to believe, can you make 4+2mm on your dipper, and can you quote us for it
If Wigan is still manufacturing I don’t think I want to buy any, having seen Mooney, and Angus placed belt.
The belt in question is 1,400/8,000 with 4+2mm covers, and 3+1mm covers, how close can you get to that, and what would be your price
Can you also tell us what price you quote Gulf, when you do, if you do.
Axford responded with a handwritten note which included the following:
1) Wigan is out.
2) We can dip express here - getting prices.
3) We have agreement re differential covers (GCS’s only advantage
- Bob should have an input (and Brian) if we are to reneg
- Who dictates GCS policy now?
There was some debate as to whether the word “reneg” appeared in the handwritten note. I am inclined to think it does though it is not entirely clear. However the general import of Axford’s response appears to be that he was prepared to provide prices for 4+2mm PVC covered belting so as to enable Fenner (Australia) to tender in the Australian market. If so, he was arguably facilitating competition by Fenner (Australia) in the Australian market involving product that had the hallmarks (perhaps save for colour) of what used to be TBA belting. It is also arguable that Axford was not particularly concerned about the arrangements with Gulf though plainly alluded to their existence whilst canvassing the possibility of reneging on them.
Benjamin gave evidence about two instances where he believed Fenner (Australia) were being allowed to quote on the sale, or supply, of belting that would have been of the character provided to Gulf by TBA under the distribution agreement. The first instance arose in October 1996 and I have already referred to some of the correspondence. Benjamin said that (probably in October 1996) Gulf had quoted to supply United colliery 4+2mm solid woven belting to be sourced from Fenner (UK). A competitor of Gulf, Scandura, quoted United colliery for similar belting at a lower price. Gulf sought a lower price from Fenner (UK) for the belting to compete with the price offered by Scandura. Fenner (UK) indicated it would not provide the belting to Gulf at a lower price. However soon after Fenner (Australia) was able to quote 4+2mm solid woven belting to United colliery at a price lower than that which Gulf had been able to quote. The Fenner (Australia) quote was for belting that would have had to have been sourced from Fenner (UK).
Another instance referred to by Benjamin concerned the tender for the provision of belting to the Newlands colliery though it is not entirely clear whether this was for heavy PVC solid woven belting with differential thicknesses though it appears to be. It is also not entirely clear which this occurred but it was probably in the months preceding September 1997. Fenner (Australia) had quoted lower prices than Gulf for the belting and secured the contract. Benjamin said Fenner (Australia) would have been quoting for belting that would have been sourced from Fenner (UK). Benjamin said he considered the Fenner PLC group adopted a pricing strategy which preferred Fenner (Australia) over Gulf for the same or similar product.
The applicants criticised the quality of the evidence concerning this question of whether the Fenner PLC group and Fenner (Australia) had acted in a way which was inconsistent with Gulf’s rights as sole distributor of TBA belting under the distribution agreement. That evidence was not, however, directly challenged by evidence of the applicants and, in particular, evidence from Fenner (Australia). The evidence viewed as a whole satisfies me that there is an arguable case that the Fenner PLC group were not assiduously protecting Gulf’s position under the distribution agreement and ensuring that Fenner (Australia) would not derive any advantage over Gulf by virtue of the association Fenner (Australia) had with the Fenner PLC group. While it may be accepted that there is no direct corporate relationship between Fenner (Australia) and Fenner (UK) and TBL, the commercial demarcation line between them does not presently appear to be as clear as the corporate structure might otherwise suggest. In my view, it would be inappropriate for the Court to make orders to enable the applicants to assert such rights as they might have under the distribution agreement to the detriment of Gulf in circumstances where they had failed to fully recognize Gulf’s rights, to its detriment, under the same agreement.
The respondents raise the question of delay on the applicants part in resisting the grant of interlocutory injunctive relief. Delay can be an important matter: see Carlton & United Breweries (New South Wales) Pty Ltd v Bond Brewing New South Wales Ltd (1987) 76 ALR 633 at 638. It is clear that by early 1998 the applicants had, at its lowest, a suspicion of Gulf’s involvement in the promotion of Depreux belting and its disinterest in promoting in any way belting provided by TBL. The applicants sought to explain the time it took to institute proceedings, which were commenced on 9 June 1998, by reference to the need, perceived by those advising the applicants, to gather together sufficient information to justify the making of an application for interlocutory relief in an Australia court that would have some prospects of success. It is difficult to assess whether this caution was entirely justified though a court should not, in my opinion, readily conclude that caution of that type was not warranted. In the mix of considerations that emerge in this case the question of delay does not appear to me to be a significant one. Rather, as I have already discussed, of greater significance is the approach taken by the Fenner PLC group to the obligations of TBA under the distribution agreement and the somewhat flexible approach adopted in relation to protecting the position of Gulf having regard to the activities of Fenner (Australia).
I accept that the position of the Fenner PLC group has been adversely affected by its inability to secure the series 400 approvals which, in part, arose from the conduct of Gulf. However Gulf has indicated that it remains willing to assist in the obtaining of those approvals on a commercial basis if it would lead to more speedy approval though one has to be somewhat sceptical about the enthusiasm with which the task would be approached. Equally, however, the injunctive relief sought by the applicants would severely curtail the business activities of Gulf and associated interests though leaving open the possibility of it continuing to act as the distributor of belting which was not PVC covered woven belting or belting produced by the Fenner PLC group which might be characterised as TBA belting. However the likelihood of Gulf actively distributing belting of the second type is, and I apprehend was conceded by counsel for the applicants to be, remote given the essential breakdown in the commercial relationship between Gulf and the Fenner PLC group.
Another factor which militates against the granting of interlocutory injunctive relief is the adequacy of the remedy of damages. It appeared to be accepted by counsel for the applicants that damages would be an adequate remedy if the only basis upon which the application for final relief is brought is that Gulf had breached the distribution agreement by selling the products of a competitor. However the applicants pointed to the conduct of Gulf in not promoting belting provided by TBL and seeking to discredit it, and not seeking the 400 series approvals. This, it was submitted, had destroyed the TBL market in Australia and it was appropriate that injunctive relief be granted to enable that market to be recaptured. However, even if these matters are made out at a final hearing I do not presently see why damages would not provide the applicants with an adequate remedy. Moreover an accepted approach is whether by leaving a plaintiff to a remedy in damages justice is done: see Wight v Hasberdan Pty Ltd (1984) 2 NSWLR 280 at 290 and for reasons I earlier gave concerning the conduct of the applicants, it is in this case.
Conclusion
The case of the applicants is not a strong one in the sense that it is unlikely that they will demonstrate that there has been an effective assignment to Fenner (UK) of the distribution agreement. That is not to say, however, that there is not a serious question to be tried on this and related issues. However, for reasons that I have endeavoured to explain the balance of convenience does not, in my opinion, warrant the grant of injunctive relief of the type sought. Accordingly, I will dismiss the application for interlocutory relief with costs. However I am not intending to preclude the making of orders of the type referred to in proposed interlocutory orders 12 and 16 in the application. The only formal order I will make is to adjourn the matter to Friday, 3 July 1998 to enable the parties to bring in short minutes giving
effect to these reasons.
I certify that this and the preceding twenty-eight (28) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore
Associate:
Dated: 30 June 1998
Counsel for the Applicant: Ms Madeleine Clark Solicitor for the Applicant: Cowley Hearne Counsel for the First, Second, Fourth, Fifth and Sixth Respondents: Mr Howard Insall Solicitor for the First, Second, Fourth, Fifth and Sixth Respondents: Baker & McKenzie Counsel for the Third, Seventh and Eighth Respondents Mr Graham Segal Solicitor for the Third, Seventh and Eighth Respondents Charles Roth & Co Date of Hearing: 9, 10, 16, 17, 18 and 19 June 1998 Date of Judgment: 30 June 1998
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