Jaddcal Pty Ltd v Minson
[2011] WASC 28
•8 FEBRUARY 2011
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: JADDCAL PTY LTD -v- MINSON [2011] WASC 28
CORAM: LE MIERE J
HEARD: 8 NOVEMBER & 7 DECEMBER 2010
DELIVERED : 8 FEBRUARY 2011
FILE NO/S: CIV 2730 of 2010
BETWEEN: JADDCAL PTY LTD
First Plaintiff
ALEXANDER ANURIW
Second PlaintiffDONNA MAREE ANURIW
Third PlaintiffAND
DAVID SHANE MINSON
First DefendantLOUISE ANNE MINSON
Second DefendantJOHN ROBERT BRUSKE
Third DefendantCHERYL BRUSKE
Fourth DefendantROSELINK ENTERPRISES PTY LTD
Fifth DefendantDWIGHT ALEXANDER WILLIAMS
Sixth DefendantBRENDAN JOHN LOWICK
Seventh DefendantCASEY SHANE MINSON
Eighth DefendantDONALD ALEXANDER McLELLAN
Ninth DefendantANDREW CHRISTOPHER BRUSKE
Tenth Defendant
Catchwords:
Practice and procedure - Interlocutory injunction - Restraint of trade - Tortious interference with contractual relations - Serious question to be tried - Balance of convenience - Lack of evidence - Delay - Turns on own facts
Legislation:
Property Law Act 1969 (WA), s 11(2)
Supreme Court Act 1935 (WA), s 25
Result:
Application dismissed
Category: B
Representation:
Counsel:
First Plaintiff : Mr J A Davies & Mr M N Caratti
Second Plaintiff : Mr J A Davies & Mr M N Caratti
Third Plaintiff : Mr J A Davies & Mr M N Caratti
First Defendant : Mr D A Lenhoff
Second Defendant : Mr D A Lenhoff
Third Defendant : Mr D A Lenhoff
Fourth Defendant : Mr D A Lenhoff
Fifth Defendant : Mr M H Zilko SC & Mr M Curwood
Sixth Defendant : Mr M H Zilko SC & Mr M Curwood
Seventh Defendant : Mr M H Zilko SC & Mr M Curwood
Eighth Defendant : Mr M H Zilko SC & Mr M Curwood
Ninth Defendant : Mr M H Zilko SC & Mr M Curwood
Tenth Defendant : Mr M H Zilko SC & Mr M Curwood
Solicitors:
First Plaintiff : Gary Rodgers
Second Plaintiff : Gary Rodgers
Third Plaintiff : Gary Rodgers
First Defendant : Holborn Lenhoff Massey
Second Defendant : Holborn Lenhoff Massey
Third Defendant : Holborn Lenhoff Massey
Fourth Defendant : Holborn Lenhoff Massey
Fifth Defendant : Curwood & Co Pty Ltd
Sixth Defendant : Curwood & Co Pty Ltd
Seventh Defendant : Curwood & Co Pty Ltd
Eighth Defendant : Curwood & Co Pty Ltd
Ninth Defendant : Curwood & Co Pty Ltd
Tenth Defendant : Curwood & Co Pty Ltd
Case(s) referred to in judgment(s):
Allstate Life Insurance Co v ANZ Banking Group Ltd (1995) 58 FCR 26
American Cyanamid v Ethicon Ltd (1975) 2 WLR 316
Australian Broadcasting Corporation v O'Neil [2006] HCA 46; (2006) 227 CLR 57
Australian Electrical Electronics Foundry & Engineering Union (WA Branch) v Hamersley Iron Pty Ltd (1998) 19 WAR 145
Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618
Boase v Seven Network (Operations) Ltd [2005] WASC 269
Carlton and United Breweries (NSW) Pty Ltd v Bond Brewing New South Wales Ltd (1987) 76 ALR 633
Castlemaine Tooheys Ltd v South Australia [1986] HCA 58; (1986) 161 CLR 148
Esso Petroleum Co Ltd v Harper's Garage (Stourport) Ltd [1968] AC 269
Hexal Australia Pty Ltd v Roche Therapeutics Inc [2005] FCA 1218
Hivac Ltd v Park Royal Scientific Instruments Ltd [1946] Ch 169
Hydron Pty Ltd v Harous [2005] SASC 74
International Entertainment (Aust) Pty Ltd v Churchill [2002] QSC 317
Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535
Osborne v Landpower Developments Pty Ltd [2003] WASCA 117
Potters‑Ballotini v Weston‑Baker [1977] RPC 202
Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth and Wyeth Australia Pty Ltd (No 2) [2010] FCA 1212
Smith v New South Wales Bar Association (1992) 176 CLR 256
Synavant Australia Pty Ltd v Harris [2001] FCA 1517
TSV Holdings Ltd v Evans [2008] VSC 157
Westina Corporation Pty Ltd v BGC Contracting Pty Ltd [2009] WASCA 213
Woolley v Dunford (1972) 3 SASR 243
LE MIERE J: The plaintiffs by summons dated 29 October 2010 apply for an interlocutory injunction restraining the defendants from doing any act in the construction, establishment or operation of an ice rink at Mirrabooka or further facilitating the construction, establishment or operation of the ice rink.
Background
The second and third plaintiffs (the Anuriws) together with the first to fourth defendants formed a company, Jaddcal Pty Ltd, in February 2008 to establish an ice rink business in Malaga. The Anuriws and the first to fourth defendants were directors and shareholders of Jaddcal. Jaddcal took out a 15 year lease with two five year options to renew. The ice rink opened for business on 15 April 2009 under the name Perth Ice Arena (PIA).
The Anuriws fell out with the first to fourth defendants and court proceedings for oppression were commenced in 2009 by the Anuriws. The proceedings were settled by way of a deed dated 28 August 2009 (Deed), approximately five months after the PIA had opened. The Deed provided that the Anuriws pay to the first to fourth defendants $160,000 each for their respective shares in Jaddcal. David Minson and John Bruske were paid additional amounts to refund them for their initial investment. The Deed also contained a restraint clause (Restraint Clause) whereby the first to fourth defendants (the Restrained Parties) were restrained from direct or indirect involvement in an ice rink business within 50 km from the Perth GPO for three years. The Anuriws continue to own and operate the PIA in partnership with new partners Robert and Tanya Salamone.
In August 2009 at an ice hockey championship in Newcastle the idea of building a new ice rink was discussed by Casey Minson, Steve Kilgallon, Dwight Williams, Brendan Lowick and Donald McLellan. David Minson was also present at the championship. The new rink was further discussed in Perth in August 2009 with Dwight Williams and his family, Brendan Lowick, Donald McLellan and his family and Andrew Bruske present. It was also discussed at the Minson's residence in December 2009 with John and Andrew Bruske, Brendan and Karen Lowick, David and Louise Minson, Donald and Rae McLellan, Donald's parents‑in‑law and Pina Carafelli, the accountant, present. Casey Minson is the son of David and Louise Minson. Andrew Bruske is the son of John and Cheryl Bruske. Following discussions finances were raised and a lease was taken out for the purpose of opening a new ice rink in Mirrabooka (the MIR). A company named Roselink Enterprises Pty Ltd was formed in February 2010 for the purposes of building the MIR which lists Dwight Williams, Brendan Lowick, Casey Minson, Donald McLellan and Andrew Bruske as directors (Roselink Parties).
In or around January 2010 the Anuriws heard of rumours of a new ice rink opening and that the Restrained Parties were involved in the operation of the new ice rink but were not aware of where the business was located. A new ice rink was under construction in Mirrabooka, which is approximately 6 km from the PIA. The Anuriws were informed that shipping containers containing ice rink equipment were being held at the property of Dwight and Sandra Williams, who had stored equipment for the Anuriws when fitting out the PIA. Donna Anuriw in or about April 2010 questioned Sandra Williams about the containers but was unable to confirm if the Restrained Parties were involved in the construction of the MIR. About a week later Alexander Anuriw further questioned Sandra Williams who stated the equipment was the property of David Minson. On 25 August 2010 Alexander Anuriw visited the MIR and saw John Bruske, Karen Lowick, Brendan Lowick and Dwight Williams at the site. On or about August 2010 Alexander Anuriw was informed that the lessee of the MIR was a company named Roselink Enterprises.
On or about 8 October 2010 the plaintiffs' solicitors wrote to the Roselink Parties notifying them of the existence of the Restraint Clause. On 29 October 2010 the plaintiffs commenced proceedings against the Restrained Parties seeking damages for breach of a restraint of trade and a permanent injunction and also against the Roselink Parties seeking damages for tortious interference and a permanent injunction. On the same date the plaintiffs filed a summons for an interlocutory injunction.
Plaintiffs' contentions
The plaintiffs allege that Restrained Parties are involved in the operation of the MIR in breach of the Restraint Clause. Alexander Anuriw in his affidavit sworn 29 October 2010 states that none of the Roselink Parties has the necessary expertise to set up or run an ice rink without direct assistance and supervision from the Restrained Parties as the Restrained Parties are among few in Perth with the requisite expertise required to fit out and run an ice rink. Alexander Anuriw further deposes that Casey Minson and Andrew Bruske are reliant on their parents for financial assistance and knowledge with regards to the setting up and establishment of the MIR in breach of the Restraint Clause. The plaintiffs submit that David Minson conducted the lease negotiations and arranged the purchase of ice rink equipment in the sum of $118,000 from the United States to fit out the MIR and that he and John Bruske are the powers behind the operation. The plaintiffs submit that an interest free loan from John and Cheryl Bruske to Andrew Bruske of $300,000 to be used for the purposes of setting up the MIR breaches the Restraint Clause. Further Mr Grasso, a former employee at the PIA, states that John Bruske had asked him for a quote for lighting and sound equipment, which he believed was for the purpose of the MIR. The plaintiffs allege that the Roselink Parties are tortiously complicit in this breach and should be also restrained.
Application for interlocutory injunction
Pursuant to s 25 of the Supreme Court Act 1935 (WA), an injunction is to be granted in all cases where it is just and convenient. In an application for an interlocutory injunction the court addresses itself to two main inquiries. Firstly, whether the plaintiff has made out a prima facie case and secondly, whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted: Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618, 622 ‑ 623.
Serious question to be tried
The court must be satisfied that the plaintiffs have made out a prima facie case. In doing so the court must consider the strength of the plaintiffs' case having regard to the governing consideration that the requisite strength of the probability of ultimate success depends upon the nature of the rights asserted and the practical consequences likely to flow from the interlocutory orders sought: Australian Broadcasting Corporation v O'Neil [2006] HCA 46; (2006) 227 CLR 57 [71]. That does not mean that the court is to conduct any form of preliminary trial. It is sufficient that the plaintiffs show a sufficient likelihood of success to justify, in the circumstances, the preservation of the status quo pending trial.
The current case concerns two allegations, firstly, whether there has been a breach of the Restraint Clause by the Restrained Parties as alleged by the plaintiff above and secondly, whether the Roselink Parties were knowingly complicit in a breach that amounts to tortiously interfering with contractual relations.
The Restrained Parties: the Restraint Clause
The test to be applied in determining the validity of a restraint clause was stated by Lord Macnaughten in Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535:
All interference with individual liberty of action in trading, and all restrains of trade of themselves, if there is nothing more, are contrary to public policy, and therefore void. That is the general rule. But there are exceptions: restraints of trade and interference with individual liberty of action may be justified by the special circumstances of a particular case. It is a sufficient justification, and indeed it is the only justification, if the restriction is reasonable ‑ reasonable, that is, in reference to the interests of the parties concerned and reasonable in reference to the interests of the public, so framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public.
The general rule is that a restrictive covenant is prima facie void and can achieve validity only if it is reasonable in the interests of the parties and in the public interest. In assessing the reasonableness of the restraint clause the restraining party must show that the restraint clause goes no further than is reasonable to protect its legitimate interests.
Clause 8 of the Deed contains the Restraint Clause which reads as follows:
8.RESTRAINT
8.1The Vendors covenant and agree that they shall not, whether for themselves or on behalf of any other person, during the period of 3 years from the Settlement Date, entice or attempt to entice any present officer, employee, agent or consultant of or to the Company from continuing to be employed or engaged by the Company.
8.2The Vendors covenant and agree with the Purchaser that they shall not, without the Purchaser's prior written consent, be directly or indirectly engaged, concerned or interested in the capacity specified in clause 8.3 in the trade or business specified in clause 8.4 within the area specified in clause 8.5 within the period specified in clause 8.6
8.3As:
(a)Member;
(b)Shareholder;
(c)Debenture holder or holder of any other security;
(d)Director;
(e)Beneficiary;
(f)Unit holder;
(g)Employee;
(h)Consultant or advisor;
(i)Contractor;
(j)Agent; or
(k)Otherwise
8.4In any:
(a)Corporation;
(b)Firm; or
(c)Business,
That is engaged in or carries on, or has an interest in, an ice rink business.
8.5Within the following radius of the Perth GPO:
(a)50 kilometres;
(b)35 kilometres;
(c)20 kilometres; or
(d)10 kilometres.
8.6For a period of
(a)3 years;
(b)2 years;
(c)18 months;
(d)1 year; or
(e)6 months;
After the Settlement Date.
8.7The Vendors separately enter with the Purchasers into each of the covenants resulting from the combination of each of the capacities in clause 8.3, with each trade or business in clause 8.4, each separate geographical area in clause 8.5, and each separate period in clause 8.6.
8.8Each of those covenants constitutes a separate restraint of trade imposed on the Vendors under this Deed.
8.9If any of those covenants is or becomes unenforceable that does not affect the validity or enforceability of the other covenants that remain binding on the Vendors.
8.10The Purchasers and the Vendors acknowledge that all the prohibitions and restrictions contained in this clause 8 are reasonable in the circumstances and necessary to protect the goodwill of the Company.
8.11Nothing in this clause 8 shall be construed to prevent David from working as an electrical contractor at Cockburn Ice Arena.
The Restraint Clause effectively operates to protect Jaddcal from competition in a cascading fashion for a maximum of three years. The courts have generally allowed greater restrictions where the restraint clause appears in a sale of business agreement as opposed to those in an employment agreement, as stated by Bleby J in Hydron Pty Ltd v Harous [2005] SASC 74:
In the case of a sale of a business, the purchaser is entitled to protect himself against competition on the part of the vendor, in order to preserve, for a reasonable time, what is that he has bought. With an employee, the emphasis is not so much on restriction of activities for which the employee is trained and which might be competitive with those of the employer, but on the use of information obtained about the employer's business which would be of subsequent use to the employee or to the employee's new employer [85].
Further, as stated in Synavant Australia Pty Ltd v Harris [2001] FCA 1517, it is commonplace in the sale of a business to require those previously responsible for the management of the business to be restrained for a period to offer protection to the business:
Where the sale of a business carried on by a company is effected by means of a sale, not of the business itself, but of the issued capital of the company, it is commonplace for the parties to require that promises on the part of former shareholders be given to the purchaser. Similarly, where the vendors of the shares are not the individuals who are responsible for the management of the company, it is commonplace for the purchaser to require that the individual or individuals who are responsible for management also enter into restraints in order to afford protection to the purchaser in respect of the goodwill for which it is giving consideration [69].
The plaintiffs say that the Restraint Clause was reasonable and necessary as the PIA is only in its initial stages. Alexander Anuriw deposes that the Restraint Clause was central to the commerciality of the consideration negotiated and paid by the plaintiffs upon the Settlement Deed. In his affidavit of 29 October 2010 Alexander Anuriw states:
Neither Donna nor I would have entered into the Settlement Deed had such a covenant not been agreed to by the Restrained Parties because:
(a)The Restrained Parties had each worked and contributed to the establishment of the Perth Ice Arena and we believed that they had the knowledge, business experience and contacts needed to set up a competing business.
(b)With the amounts that the parties were being paid they would have the capital wherewithal to set a new business, and;
(c)I believed that, given the existing facilities, there was insufficient patronage in the Perth Metropolitan area to economically support the presence of another ice rink and any such new business would have a seriously detrimental effect on the business of the Perth Ice Arena.
Counsel for the Restrained Parties submits that the main justification for the Restraint Clause is the protection of goodwill of the business acquired by the purchaser. The courts have held that the sale of the goodwill of a business provides a justification for enforcing a restraint: Esso Petroleum Co Ltd v Harper's Garage (Stourport) Ltd [1968] AC 269, 335 ‑ 336. Counsel for the Restrained Parties submits that money was paid for the shares and not for the goodwill of the business and further that goodwill is not mentioned in the Deed. They submit that if the Restraint Clause is not ancillary to the sale of the goodwill of a business it should be struck down for if there is no protectable interest the covenant will be regarded as unreasonable. The plaintiffs submit that the price paid for the shares of the company includes the company's goodwill.
Where a substantial sum is paid for the shares of a company it is arguable that the restriction imposed by the restraint clause is a valid price to pay in return: TSV Holdings Ltd v Evans [2008] VSC 157 [59]. Further, where there is no evidence as to precisely how much of the share purchase price was attributable to goodwill that does not necessarily mean that no consideration was paid for goodwill of the company. The amount of the purchase price attributable to goodwill is a matter that should be the subject of evidence at trial.
Counsel for the Restrained Parties states that the plaintiffs have not established that the Restraint Clause is reasonable in the circumstances. They say there is no evidence to justify the duration of the Restraint Clause for the duration of more than one year. Further, the Restrained Parties argue there has been no breach as they are not involved in the business of the MIR and therefore do not fall within one of the categories listed in cl 8.3 of the Restraint Clause.
David Minson deposes that he purchased ice rink equipment from a United States supplier as it was offered at a competitive price and that he would be able to easily offload it for a profit. David Minson operates a company called Rink Rat Designs Pty Ltd which supplies and distributes ice rink equipment throughout Australasia. He states that there was a potential transaction in Queensland that fell through for which he was going to on sell the equipment. He deposes that around August 2009 he became aware of his son's involvement in the establishment of an ice rink and that he was approached by Casey Minson about the equipment. David Minson says he gifted the equipment to Casey Minson but took no further involvement in the establishment of the MIR. John Bruske denies that his conversation seeking a quotation for light and laser equipment was for the purpose of the MIR, but was for the establishment of ice rinks over east. Counsel for the Roselink Parties says the $300,000 given to Andrew Bruske was by way of a gift, and not a loan, and therefore John and Cheryl Bruske retain no financial interest in the MIR business.
The plaintiffs submit that the loaning of money and provision of equipment makes the Restrained Parties a lender or contributory, which they submit falls within cl 8.3(k) of the Restraint Clause. They submit a contributory includes someone who provides a loan to the Roselink Parties for the purpose of establishing the MIR. In Andrew Bruske's affidavit sworn 5 November 2010 he states:
My mother and father have since personally lent me $300,000.00 of which $100,000 has been deposited into Roselink's bank account. The balance of $200,000 has been used to purchase equipment for Roselink…
At the time my mum and dad told me they would lend me the money, my dad said to me that they were prepared to lend me the money and they were prepared to treat is as an interest‑free loan to help me out and get a start in business, or words to that effect.
Neither of my parents have any direct or indirect financial interest in Roselink or the proposed ice rink. Other than my obligation to repay them the money they have lent me, I will not be giving them any additional money from the venture nor will they work in the business.
The loan raises issues as to whether John and Cheryl Bruske retain a financial interest in the MIR. Senior counsel for the Roselink Parties submits that cl 8.3(k) cannot be read that broadly. Mr Zilko SC submits that 'otherwise' is to be read in the context of the above categories, and not as a catch all clause. Mr Zilko SC submits that if the parties had intended to restrain a 'lender' then it would have been expressly stated, but instead the clause is confined to the more formal categories already listed such as member or director.
The plaintiffs also submit that the Restrained Parties have assumed a consultancy or advisory role (see cl 8.3(h)) which is to be inferred from the relative experience of the parties and the presence of the Restrained Parties at the MIR site and during the August 2009 and December 2009 Roselink Enterprises meetings. In Brendan Lowick's affidavit sworn 5 November 2010 he states:
David and John do not have any financial interest or any role in Roselink. They attended a meeting in December 2009 with the accountant, Pina, (it was actually at David's house), when a company structure was discussed, from my point of view, their involvement at that meeting was to support and explain things to their sons.
Further, the plaintiffs submit that the Restrained Parties are members under cl 8.3(a). They submit that money was loaned to Casey Minson to hold a share of Roselink Enterprises in his name on behalf of David and Louise Minson, however, the plaintiffs provided no authority or evidence directly in support of that submission.
I find it arguable that a capital contributor or lender is related to the other categories in cl 8.3 so as to raise a prima facie case. It would be an odd situation where a restrained person cannot contribute funds for the purchase of shares in a business but they are able to loan money to another for the same purpose and therefore indirectly retain an interest in the business until the monies are repaid in the sense that the loan is to be repaid from the business revenues. Further, the close relationship between the defendants and the evidence that the Restrained Parties participated in the meeting that established Roselink Enterprises raise serious questions that the Restrained Parties had acted in the role of consultant or advisor.
The plaintiffs have made out a prima facie case that the Anuriws are entitled to enforce the Restraint Clause on the grounds that it represents a reasonable restraint. The plaintiffs paid a significant amount of money for the shares of the Restraint Parties with the view of protecting themselves from competition. It is commonplace in the sale of a business to require those previously responsible for the management of the business to be restrained for a period to offer protection to the business. The provision of money and equipment and the relationship between the parties raises serious questions to be tried as to whether the Restrained Parties have a financial interest in or have aided in the establishment of the MIR in breach of the Restraint Clause.
Ability of Jaddcal to enforce the Restraint Clause
The plaintiffs submit that although Jaddcal is not a named party to the Deed it is referred to within the Deed and upon a plain interpretation of the Deed it is the entity that is intended to take advantage of the Restraint Clause. The plaintiffs rely on s 11(2) of the Property Law Act 1969 (WA) which states that there is a right bestowed upon a party with respect to whom the benefit of a contract made is intended to flow, which entitles the beneficiary party to a cause of action:
11.Persons taking who are not parties
(2)Except in the case of a conveyance or other instrument to which subsection (1) applies, where a contract expressly in its terms purports to confer a benefit directly on a person who is not named as a party to the contract, the contract is, subject to subsection (3), enforceable by that person in his own name but ‑
(a)all defences that would have been available to the defendant in an action or proceeding in a court of competent jurisdiction to enforce the contract had the plaintiff in the action or proceeding been named as a party to the contract, shall be so available;
(b)each person named as a party to the contract shall be joined as a party to the action or proceeding; and
(c)such defendant in the action or proceeding shall be entitled to enforce as against such plaintiff, all the obligations that in the terms of the contract are imposed on the plaintiff for the benefit of the defendant.
As stated in Westina Corporation Pty Ltd v BGC Contracting Pty Ltd [2009] WASCA 213 at [43]:
Section 11(2) does not apply unless the person who seeks to enforce a benefit conferred under the contract in question is identified in the contract as the conferee of that benefit. See Jones v Bartlett [2000] HCA 56; (2000) 205 CLR 166 at [146] (Gummow & Hayne JJ). The identification may be by name, but it is not essential expressly to name a third party beneficiary before the beneficiary can invoke s 11(2). It is sufficient if the beneficiary can be ascertained by reference to an existing and identifiable class, or if the beneficiary answers a particular description, expressly referred to or identified in the contract. See The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] [2008] WASC 239; (2008) 225 FLR 1 [3365] (Owen J).
Jaddcal is not a named party to the Deed but is referred to in the Deed in the context of being the business for the running and operation of the PIA. Further, Jaddcal is mentioned in cl 8.10 where it states:
The Purchasers and the Vendors acknowledge that all the prohibitions and restrictions contained in this clause 8 are reasonable in the circumstances and necessary to protect the goodwill of the Company.
Clause 4 defines the company as Jaddcal. I find there is a prima facie case that the Restraint Clause expressly in its terms purports to confer a benefit directly on Jaddcal, that is, to protect its goodwill. Furthermore, the second and third plaintiffs are each partners to the Deed and are entitled to enforce the Restraint Clause.
Unlawful Interference with Contract
It is then necessary to turn to the issue of whether the plaintiffs have made out a prima facie case of tortious interference by the Roselink Parties. The plaintiffs submit that the Roselink Parties' complicity in the breach amounts to tortious interference.
The principles applicable to the tort of interference with contractual relations were stated by Master Newnes in Boase v Seven Network (Operations) Ltd [2005] WASC 269 at [32] ‑ [33]:
The general principle is that in order to establish a cause of action of unlawful interference with contract the plaintiff must show that the defendant, with knowledge of the contract and intent to prevent or hinder its performance, persuades, induces or procures one of the parties not to perform their obligations: Short v City Bank of Sydney (1912) 15 CLR 148.
The fact that the breach was a natural consequence of the defendant's conduct is not sufficient; the defendant must have intended the breach. It is not necessary that the defendant knows the precise terms of the contract: Woolley v Dunford (1972) 3 SASR 243 at 266 - 268. But the defendant must know of the contract and sufficient of its terms to know that what the defendant induced or procured the party to the contract to do would be in breach of the contract. If the defendant knew of the existence of the contract but believed reasonably that what the defendant induced or procured the party to do was not a breach, the defendant has not knowingly induced or procured the breach: Fightvision Pty Ltd v Onisforou [1999] NSWCA 323; (1999) 47 NSWLR 473 at [160].
Therefore, in order to establish unlawful interference with contractual relations it must be established that the Roselink Parties:
(a)had knowledge of the Restraint Clause;
(b)had intent to prevent or hinder its performance; and
(c)either:
(i)persuaded, induced or procured the parties not to fulfil their obligations; or
(ii)committed some act, wrongful in itself, to prevent performance.
The defendant must be shown to have some knowledge of the contract which has been interfered with, however, it is not necessary that the defendant knows the precise terms of the contract: Woolley v Dunford (1972) 3 SASR 243, 266 - 268. The relevant question is 'whether the defendant has sufficient knowledge of the contract to know that he was hindering, or preventing, its performance': Woolley v Dunford (270).
The plaintiffs submit that the Roselink Parties have been given notice of the Restraint Clause. Alexander Anuriw deposes that on 30 September 2009 he had a conversation with Dwight Williams at the PIA in which he informed Dwight Williams of the precise terms of the Deed. Further, on 5 September 2009 Alexander Anuriw deposes he had a conversation with Brendan Lowick in the administration office at the PIA where he informed him of the terms of the Deed. The plaintiffs submit that due to the nature of the relationship of Casey Minson and Andrew Bruske with their parents they are sufficiently aware of the terms of the Restraint Clause. On 8 October 2010 each of the Restrained Parties received a letter from the plaintiffs' solicitors informing them of the terms of the Restraint Clause and requesting that they cease to act. There is no evidence Donald McLellan was made aware of the Restraint Clause prior to receiving the plaintiffs' solicitors' letter of 8 October 2010.
The Roselink Parties dispute the plaintiffs' evidence. Brendan Lowick deposes that he was not informed of the terms of the Restraint Clause by Alexander Anuriw. Further, Dwight Williams denies the conversation alleged by Alexander Anuriw. In Casey Minson's affidavit of 5 November 2010 he deposes that in August 2009 his father, Dwight Williams, Brendan Lowick, Donald McLellan and Steve Kilgallon went to Newcastle to watch an ice hockey championship. At the championship he states that he spoke with Dwight Williams, Brendan Lowick, Donald McLellan and Steve Kilgallon about the possibility of a new ice rink in Perth and that his father said nothing and did not contribute. Further he states that his father told him several weeks later that he could not offer assistance because he does not have the funds and cannot get involved. He states that his father has been to the MIR on several occasions 'but only to talk to me or to drop off lunch'.
It is not the court's function at the interlocutory stage to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend: American Cyanamid v Ethicon Ltd (1975) 2 WLR 316, 323. However, in the current case there are various agreed or rather, non‑disputed facts. It is deposed that David Minson and John Bruske were in attendance whilst the MIR was being discussed by the Roselink Parties in December 2009 and that John Bruske had attended the premises of the MIR in its establishment phase. Casey Minson deposes that whilst living in Newcastle in 2009 he was aware that there were problems with the PIA and that his parents were in a court action with the Anuriws and his father had advised him on a trip to Newcastle in August 2009 that they had received a payout. Casey Minson further says that during the 2009 discussions his father did not say anything about the idea of a new ice rink, however, he later mentions the idea to his father by phone who replies 'I can't help you because I don't have the funds and cannot get involved'.
Andrew Bruske in his affidavit sworn 5 November 2010 says:
I remember my mum and dad telling me at the time the court action settled, that one of the terms of settlement was that they could not own or operate another ice rink. That was all I knew about the restraint.
In Dwight Williams' affidavit of 5 November 2010 he says:
In a much later conversation I had with David Minson, he told me that the settlement he reached with Mr and Mrs Anuriw prohibited him and John Bruske from owning an ice rink. That is all I knew of the restraint until I received a letter from Mr and Mrs Anuriw's lawyers, on or around 8 October 2010.
In Allstate Life Insurance Co v ANZ Banking Group Ltd (1995) 58 FCR 26 the Federal Court held that knowledge of the contract may be sufficient for the purpose of grounding the necessary intention to interfere with contractual rights, although the precise term breached is not known. Thus it may be said that knowledge of a settlement whereby the Restraint Parties are not able to be involved in an ice rink business is sufficient. The facts outlined above appear to show a prima facie case against Dwight Williams and Andrew Bruske. One may also argue in that the circumstances that Casey was aware his father could not get involved and had been involved in a court action with the Anuriws would put Casey on sufficient notice of the terms of settlement, that is, that his parents were restrained from being involved in an ice rink business. However, the plaintiffs have failed to provide any evidence that Donald McLellan was aware of the Restraint Clause.
It must also be shown that the defendants intended the breach. The fact that the breach was a natural consequence of the defendants' conduct is not sufficient: Boase v Seven Network (Operations) Ltd [32]. At first the plaintiffs submitted that the Roselink Parties had reckless disregard to the Restraint Clause. That is not enough to satisfy the requirement of intention to procure a breach. The plaintiffs then stated that as the Roselink Parties are aware of the Restraint Clause and that the Restrained Parties are not to be involved they have knowingly, and therefore intentionally, breached the Restraint Clause. Questions of knowledge and intention often become intertwined in this area.
The final step is to establish that the Roselink Parties have interfered with the contract so as to cause the breach. This can include persuading, inducing or procuring the breach. The interference alleged to have taken place is negotiating with and aiding the Restrained Parties for the purposes of setting up the MIR. In the past there has been a distinction between advice being given and persuasion: Woolley v Dunford (290). The distinction between advice and persuasion has been criticised as it confuses the question of causation. It is no longer appropriate to draw a rigid line between advice and persuasion but rather to ask whether the breach has been fairly attributable to persuasion or pressure.
The above matters raise serious questions to be tried in respect of whether the Roselink Parties had knowledge of the Restraint Clause and whether they persuaded, induced or procured the Restraint Parties not to fulfil their obligations. These live questions cannot be determined at this interlocutory stage, however, the existence of these live questions means that the plaintiffs' prospects of success are far from assured, which is a factor which may be taken into account when assessing the balance of convenience.
Application to re-open
On 25 November 2010 the plaintiffs applied by chamber summons for leave to introduce further evidence in the application for an interlocutory injunction. The evidence sought to be introduced is an affidavit of Christopher Daws, accountant, sworn 25 November 2010. The affidavit sets out Mr Daws' findings based upon the first plaintiff's financial statements, that is, that the first plaintiff would face imminent insolvency in the event that the Roselink Parties opened the MIR. The plaintiffs also seek to introduce a further affidavit of Alexander Anuriw sworn 25 November 2010 which outlines Jaddcal's costs and supports Mr Daws' findings. The summons was brought on for hearing on 7 December 2010. At the hearing I reserved my decision on the summons to be delivered with the reasons for the application for an interlocutory injunction.
The principle which should guide the court in determining whether to grant an application for leave to re‑open is whether the interests of justice are better served by allowing or rejecting the application as the case may be. The appropriate test is that stated by McLure J in Osborne v Landpower Developments Pty Ltd [2003] WASCA 117 at [12] ‑ [14]:
There is some uncertainty as to the test to be applied to the exercise of the court's discretion to permit the re‑opening of a matter before orders are made. The High Court in Smith v New South Wales Bar Association (1992) 176 CLR 256 said at 266 - 267:
'If an application is made to re‑open on the basis that new or additional evidence is available, it will be relevant, at that stage, to inquire why the evidence was not called at the hearing. If there was a deliberate decision not to call it, ordinarily that will tell decisively against the application. But assuming that that hurdle is passed, different considerations may apply depending on whether the case is simply one in which the hearing is complete, or one in which reasons for judgment have been delivered. It is difficult to see why, in the former situation, the primary consideration should not be that of embarrassment or prejudice to the other side. In the latter situation the appeal rules relating to fresh evidence may provide a useful guide as to the manner in which the discretion to re-open should be exercised.'
The rules relating to fresh evidence on appeal are well known. The appellant would need to show that there was a real possibility that the further evidence would have produced a different result if it had been admitted and that the further evidence would not have been available at the original hearing by the exercise of reasonable diligence: Australian Electrical Electronics Foundry & Engineering Union (WA Branch) v Hamersley Iron Pty Ltd (1998) 19 WAR 145 160, 162 and 163. A similar test was applied in Watson v Metropolitan (Perth) Passenger Transport Trust [1965] WAR 88 on an application to re-open before judgment.
It is to be expected that a less stringent test would apply when leave to re‑open is sought before reasons are delivered and orders made because the policy in favour of finality does not have the same force. In this case there was no deliberate decision not to adduce the evidence in the March affidavit but it may have been available at the earlier hearing by the exercise of reasonable diligence. It is unnecessary for me to decide that question because I propose to apply the less stringent test referred to by the High Court in Smith (above). Relevant factors in the exercise of the discretion include the materiality of the evidence and whether the interests of justice would be advanced by its admission: Joyce v GIO (NSW) reported in Ritchie's Supreme Court Procedure, New South Wales, vol 2 p 8551‑8552 and cited with approval by the High Court in Smith (above) (at 267).
The plaintiffs have not produced any evidence explaining why the material was not before the court at the hearing. The inference to be drawn is that the evidence was reasonably available at the time of the hearing. During oral submissions on 7 December 2010 the plaintiffs' counsel stated that it was the fault of counsel, an unintentional oversight. As stated in Smith v New South Wales Bar Association (1992) 176 CLR 256 'if there was a deliberate decision not to call it, ordinarily that will tell decisively against the application' (266). I find that the evidence could by reasonable diligence have been previously discovered.
Counsel for the Roselink Parties submitted that the evidence, even if admitted, would not affect the result, which is a factor that goes against admitting the evidence. The applicant needs to show there was a real possibility that the further evidence would produce a different result if it had been admitted: Australian Electrical Electronics Foundry & Engineering Union (WA Branch) v Hamersley Iron Pty Ltd (1998) 19 WAR 145. Counsel for the Roselink Parties submitted that the affidavit of Mr Daws shows a business in decline, even before the opening of the MIR. The evidence consists of MYOB records from June 2009 to October 2009. Despite the declining sales figures presented in the affidavit, Mr Daws makes no assessment of whether the apparent revenue decline would see the first plaintiff become insolvent without competition in any event. Thus the evidence is equivocal as there is no analysis of why the income of the business has already declined and whether a continuing decline (even in the absence of competition) will see Jaddcal become insolvent. To state that the opening of the MIR will cause irreparable harm to the PIA is conjecture, it cannot be drawn from the evidence of Mr Daws.
Further, the affidavit makes the assumption that there will be a 10% drop in turnover as a result of competition. However, this appears to have been arbitrarily selected, with no basis for the assertion. In Alexander Anuriw's affidavit of 25 November 2010 he states:
If the defendants are permitted to open the competing ice rink in Mirrabooka, I would expect to lose at least 10% door sales to them because;
a.PIA is currently the only ice rink in Perth's northern suburbs;
b.The proposed Mirrabooka ice rink is only about 8km from PIA;
c.The proposed Mirrabooka ice rink is situated in a location that is better serviced by the surrounding shopping centre, fast food outlets and tavern; and
d.The proposed Mirrabooka rink is new and bigger than PIA.
Those are not sufficient reasons to justify the selection of a 10% drop in turnover. Therefore there is no probative value in allowing the evidence.
Delay is a further factor that weighs against granting the plaintiffs leave to re‑open. The hearing of the application for an interlocutory injunction took place on 8 November 2010. On 22 November 2010 the plaintiffs' solicitors wrote to the court requesting that the court delay its delivery of reasons as they would be filing a further chamber summons seeking orders to re-open the case. The plaintiffs filed a summons to re-open the case on 25 November 2010, that is, 17 days after the hearing of the interlocutory injunction. There is no adequate explanation as to why the plaintiffs took a further 17 days to file the summons to re-open the application. The interlocutory injunction was heard as a matter of urgency. The plaintiffs have delayed the matter by the filing of the summons to re‑open the case.
Having regard to the fact that the evidence was available at the time of the hearing, the delay in the application to re‑open and that there is no probative value in admitting the evidence I will decline the plaintiffs' application for leave to re‑open in the application for an interlocutory injunction.
The balance of convenience
The second main enquiry to which the court addresses itself is whether the inconvenience or injury which the plaintiffs would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendants would suffer if an injunction were granted.
Comparative injury
In considering the balance of convenience the court should have regard to the comparative injury if an injunction were to be granted rather than withheld. The court must weigh up the comparative injury that will arise from granting or withholding the injunction, seeking out the major risk of damage and, in particular, of any irreparable damage.
The plaintiffs submit that the PIA is at particular risk of becoming insolvent if the injunction is not granted as the PIA is in the vulnerable early phase of the business establishment. The plaintiffs submit that the PIA will be in a better state to deal with and cope with the impact of that stress of competition 22 months further down the track. In Alexander Anuriw's affidavit sworn 29 October 2010 he states:
I believe that, given the existing facilities, there was insufficient patronage in the Perth Metropolitan area to economically support the presence of another ice rink and any such new business would have a seriously detrimental effect in the business of the Perth Ice Arena.
There is no evidence by way of figures or numbers to support Alexander Anuriw's assertion. The plaintiffs have not brought forward viable evidence displaying the outgoings of the company and an assessment of the likely fall in income if, for example, the MIR opened for business. There is no evidence before me to suggest that metropolitan Perth only has enough interest in an ice rink to support one business. The court is unable to draw an inference on no evidence that the PIA will become insolvent in the face of competition.
The plaintiffs submit that whilst there is no evidence to prove that the PIA cannot withstand competition, it is a matter of notoriety that these businesses are at their most vulnerable during their establishment phase, particularly given the nature of the market. Counsel for the plaintiffs submitted one can draw the inference by the fact that there is only one ice rink in the northern suburbs, that which is operated by the plaintiffs and therefore any new large enterprise, being the second only of its kind in the northern suburbs, must necessarily have a significant impact on the viability and prospects of the existing icerink. The plaintiffs' submission is pure speculation. There is no evidence about the operation of the plaintiffs business, that is, whether it is trading at a loss or profit. There is no evidence of what effect the opening of a rival business will have on its operations or how much business it will lose. The fact that the setting up of a rival business is likely to affect the business of the PIA is not enough. There is a material difference between evidence which enables an inference that the benefit lost can be described as 'real and not trivial' and evidence of actual impacts. Where there is no evidentiary foundation for anything other than a conclusion at a high level of generality that one stands to lose some benefit if the orders they sought are not made that is a factor that weighs against the granting of orders: Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth and Wyeth Australia Pty Ltd (No 2) [2010] FCA 1212 [31].
The Roselink Parties submit the balance lies in their favour as they stand to be financially destroyed. The plaintiffs, on the other hand, submit that the granting of an interlocutory injunction would only require the Roselink Parties to postpone any further activity, rather than stop it altogether. Roselink Enterprises has obligations to fulfil including rental payments, with monthly expenses in the order of $45,000 per month. These payments are fixed payments in the sense that they are incurred whether the rink is operating or not. Further, the ice rink is going through the process of activation by the freezing of water. The estimated electricity charges will be in the range of $20,000 per month. Once the ice rink is activated the ice cannot be thawed without flooding the building, hence there is a significant ongoing expenditure for electricity which will be in the range of $20,000 per month. Without revenue from trading, Roselink Enterprises and its directors will be placed in a position of critical financial hardship. Also, the sixth to tenth defendants have invested a significant amount of their own money as start-up capital for the business which would be lost if the ice-rink were not able to open and operate.
It is unjust for the court to intervene when the grant of an interlocutory injunction would involve a disproportionate risk of hardship to the defendant. This position often arises where there has been comparatively little risk of serious injury to the plaintiff but the grant of an interlocutory injunction would have interfered with the livelihood of the defendant. As stated by Lord Denning Potters‑Ballotini v Weston‑Baker [1977] RPC 202:
… in considering the balance of convenience, so far as the defendants are concerned, the effect of an injunction at this stage might be disastrous, even though it was only for a limited number of months until trial. Here is a great plant (I agree that it was erected surreptitiously and secretly, as far as one can see) but it cost a quarter of a million pounds. The money has been raised on loan, on security debentures, and men are working there now. I agree that the defendants ought not to be allowed to gain any advantage by any unlawful conduct, but even so the effect of an injunction might be disastrous … But both parties agree it is a case for a speedy trial, and that seems to be to be the proper solution (207).
However, the defendants are not to gain advantage by unlawful conduct which they have knowingly chosen to place themselves in: Hivac Ltd v Park Royal Scientific Instruments Ltd [1946] Ch 169.
An apparently strong claim may lead a court more readily to grant an injunction when the balance of convenience is fairly even but a claim of less strength which nevertheless raises a serious question to be tried may attract interlocutory relief where there is a marked balance of convenience in favour of it: Castlemaine Tooheys Ltd v South Australia [1986] HCA 58; (1986) 161 CLR 148, 154. The plaintiffs submitted that the balance lies in their favour as they have a strong case and therefore a high degree of assurance that they will be successful at trial. As stated above, whilst there is a serious question to be tried there are real issues as to whether the sixth to tenth defendants knew the terms of the Restraint Clause and as to the Restrained Parties' scope of involvement in the business. In situations where such live questions are to be determined, the balance of convenience favours the refusal of an injunction: International Entertainment (Aust) Pty Ltd v Churchill [2002] QSC 317.
The granting of an interlocutory injunction in the current matter would cause serious financial hardship for the Roselink Parties, and is likely to close the MIR business. I therefore find that the balance of convenience lies in favour of the defendants.Damages not an adequate remedy
The plaintiffs must prove that if an injunction is not granted they will suffer irreparable harm for which damages is not an adequate remedy: Hexal Australia Pty Ltd v Roche Therapeutics Inc [2005] FCA 1218. The plaintiffs submit damages will not be an adequate remedy as Jaddcal will suffer irreparable financial harm in the form of a loss of business and that Jaddcal has been deprived of a right to a head start that they paid for. In their written submissions, counsel for the Roselink Parties submits that damages are an adequate remedy which will be able to be quantified once the MIR opens and pursued in a breach of contract claim against the Restrained Parties. I find that there is no evidence by way of figures before me to support the plaintiffs' submission that the alleged breaches cannot be cured by way of damages. The right to a 'head start' in and of itself is not enough to display that damages will not adequately cure a breach.
Delay
The plaintiffs have significantly delayed their application for injunctive relief, which is a factor against the granting of interlocutory relief. They have deposed to knowing of the defendants alleged plans since February 2010 but took no steps to put the defendants on notice. Counsel for the plaintiffs says that at first there were only rumours to which the plaintiffs did not take much notice and further that as it was only hearsay there was not enough evidence to bring an application. In August a private investigator was hired and on 25 August 2010 Alexander Anuriw deposes he saw John Bruske at the MIR site. On 8 October 2010 solicitors were engaged and wrote to the Roselink Parties. The letter stated:
Our client attended the premises on 25 August 2010. John Bruske was on site at that time.
The purpose of this letter is to inform you that we are investigating the involvement of the Restrained Parties in the fit out and development of the proposed ice rink.
The reason for writing to you at the outset of our investigation is to allow you the opportunity to consider your position and Roselink's position at the earliest opportunity. You may wish to terminate or delay the fit out as to avoid further financial loss. This is, of course, a matter for you and the other involved parties.
We anticipate receiving instructions to commence legal proceedings to restrain each of the Restrained Parties from having any involvement in an icerink business in so much as it is a breach of the restrictive covenants set out in the Deed. This would include, without limitation, an involvement as a beneficiary or consultant …
If you do not respond to this letter and if our investigations confirm our instructions, we would expect to receive instructions to issue proceedings without further notice to you or the other parties.
There is no reason for the delay between 25 August 2010, when John Bruske was sighted at MIR, and 8 October 2010. Further there is no explanation as to why the parties waited until 29 October 2010 to file their application for an interlocutory injunction. Excess delay, whilst not fatal, is a factor that weighs against the court not granting an interlocutory injunction: Carlton and United Breweries (NSW) Pty Ltd v Bond Brewing New South Wales Ltd (1987) 76 ALR 633. The considerable delay in the current matter has meant the establishment of the MIR has proceeded with considerable expense incurred. This is a factor that weighs against the granting of an interlocutory injunction.
Conclusion
I will dismiss the plaintiffs' application for an interlocutory injunction. The balance of convenience favours the defendants in that they will suffer severe harm if an interlocutory injunction is granted whilst the plaintiffs have not brought forth convincing evidence of the harm which they would suffer if an injunction is not granted. Further, the delay in bringing the application weighs against the granting of an injunction. In order to resolve the live issues the parties should make every endeavour at a speedy trial.
7
23
2