Metcash Trading Ltd v Hourigan's IGA Umina Pty Ltd

[2003] NSWSC 326

CITATION:	Metcash Trading Ltd & Anor v. Hourigan's IGA Umina Pty Ltd & Ors [2003] NSWSC 326
HEARING DATE(S):	15 April, 2003
JUDGMENT DATE:	16 April 2003
JURISDICTION:	Equity Division
JUDGMENT OF:	Palmer J
DECISION:	Interlocutory injunction granted.
CATCHWORDS:	INTERLOCUTORY INJUNCTION - Whether serious questions to be tried - complex legal issues - factual issues - balance of convenience - hardship to defendant if injunction granted would be result of defendant's own wrongdoing.
LEGISLATION CITED:	- Conveyancing Act 1919 (NSW) - s.118 - Real Property Act 1900 (NSW) - Trade Practices Act 1974 (Cth) - s.52, s.53A, s.80, s.87
CASES CITED:	- Carlton & United Breweries Ltd v Tooth & Co Ltd (unrep., 14 February 1990, NSWSC, Waddell J) - Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 - DC Thomson & Co Ltd v Deakin [1952] Ch 646
PARTIES :	Metcash Trading Limited - First Plaintiff Jewel Food Stores Pty Ltd - Second Plaintiff Hourigan's IGA Umina Pty Ltd - First Defendant Peter John Hourigan - Second Defendant John Hourigan - Third Defendant Mark Hourigan - Fourth Defendant Bi-Lo Pty Ltd - Fifth Defendant Coles Myer Property Developments Ltd - Sixth Defendant
FILE NUMBER(S):	SC 2278/03
COUNSEL:	G.C. Lindsay SC - Plaintiffs T.P. Duggan - 1st to 4th Defendants F.M. Douglas QC, W.G. Muddle - 5th & 6th Defendants
SOLICITORS:	Landerer & Co - Plaintiffs Watson Mangioni - 1st to 4th Defendants Deacons - 5th & 6th Defendants

Introduction

1    By Notice of Motion filed on 9 April 2003 the Plaintiffs (respectively “Metcash” and “Jewel”) seek an interlocutory injunction restraining the First Defendant (“Hourigan’s”) from completing an agreement for the sale of a substantial supermarket business conducted by Hourigan’s at The Village Shopping Centre, corner of West and Oscar Streets, Umina in New South Wales (“the Supermarket Business”).

2    The proceedings have been brought on for a contested interlocutory hearing urgently. For understandable reasons, the Plaintiffs have had to prepare their case in haste and issues have been debated at the hearing before me which were not raised in the latest Amended Statement of Claim filed by the Plaintiffs. The issues which the Plaintiffs wish to raise in a Further Amended Statement of Claim are set out in a 38 page document entitled “Metcash’s Statement of Contentions of Fact and Law”, which I have marked as Exhibit P4. At the hearing of the Plaintiffs’ Motion these issues were debated by Mr Duggan of Counsel, who appears for Hourigan’s, and by Messrs Douglas QC and Muddle who appear for the Fifth and Sixth Defendants (“Bi-Lo” and “Coles”).

3    How these proceedings came before me requires some explanation. On 7 April 2003, Counsel for Bi-Lo applied ex parte to the Duty Judge, then Gzell J, for leave to file in Court and to serve on short notice a Summons and Notice of Motion in which Bi-Lo was Plaintiff and Hourigan’s was Defendant. The Summons sought a declaration that there was a binding and enforceable agreement between Bi-Lo and Hourigan’s for the sale of the Supermarket Business to Bi-Lo and an order for specific performance of that agreement. The leave sought was granted and the Summons was stood over to 9 April 2003 before me as Duty Judge. I will call these proceedings the “Bi-Lo Proceedings”.

4    On 9 April 2003, the Bi-Lo Proceedings were called on before me. Mr Douglas QC and Mr Muddle appeared for Bi-Lo and Mr F. Gleeson of Counsel appeared for Hourigan’s. Mr Einstein of Counsel appeared for Metcash and informed me that his client sought to be joined as a Defendant in the Bi-Lo Proceedings. He said that Metcash claimed to be entitled to a pre-emptive right to purchase the Supermarket Business under an agreement entered into with Hourigan’s prior to the agreement for sale between Hourigan’s and Bi-Lo.

5    Mr Douglas announced that Hourigan’s now did not refuse to complete the sale of the Supermarket Business to Bi-Lo and that completion of that sale was planned for the next day. Mr Gleeson stated that Hourigan’s did not oppose an order for specific performance of the sale agreement to Bi-Lo. Mr Einstein said that his client wished to seek an interlocutory injunction restraining completion of the sale of the Supermarket Business to Bi-Lo.

6    After some discussion, orders were made that Metcash commence separate proceedings by Statement of Claim (“the Metcash Proceedings”) and a timetable was set to bring the Metcash Proceedings and the Bi-Lo Proceedings back before the Court on 15 April for the purpose of hearing Metcash’s application for an interlocutory injunction. An order was made that evidence in one proceeding be evidence in the other.

7    Metcash served on the Defendants an Amended Statement of Claim in which Jewel was added as Second Plaintiff, and Bi-Lo and Coles were added as Fifth and Sixth Defendants. That Amended Statement of Claim and the Defences to it were filed in Court on 15 April 2003. All parties filed further evidence and each prepared an outline of submissions. In their outline, Exhibit P4, Metcash and Jewel foreshadowed further amendments to the Amended Statement of Claim, which they set out with some particularity. As I have noted, these foreshadowed amendments were debated by Mr Douglas QC and Mr Duggan. Because all parties desire a judgment on the Notice of Motion prior to the Easter break, I think it expedient to deal with the issues as formulated both in the Amended Statement of Claim and in the Plaintiffs’ outline, Exhibit P4, rather than adjourn the proceedings again to enable a Further Amended Statement of Claim to be filed.

The facts

8    At all material times Jewel has been a subsidiary of Metcash (formerly called Davids’ Limited), and Bi-Lo has been a subsidiary of Coles. Metcash and Coles are competitors in the conduct of retail supermarkets.

9    At all material times up to 23 September 1999 Metcash and Jewel operated the Supermarket Business, which was then known as “Jewel Food Store”. The property in which the Supermarket Business was conducted (“the Supermarket Premises”) was owned by a company called KLVC Pty Ltd (“KLVC”) and was leased to Jewel under a long-term lease containing an option to renew (“the Supermarket Lease”).

10    By an Agreement for Sale dated 23 September 1999 between Metcash, Jewel, Hourigan’s and the Second to Fourth Defendants as guarantors, Metcash agreed to sell to Hourigan’s the goodwill, plant and stock of the Supermarket Business and Jewel agreed to use its best endeavours to transfer the Supermarket Lease to Hourigan’s on completion of the sale, upon specified terms to be set out in a Deed of Assignment.

11    The Agreement for Sale contained the following terms:

“ 21 RIGHT OF FIRST REFUSAL

21.1 No Disposal of Business

The Purchaser cannot transfer the Business acquired pursuant to this agreement (“Sale Business”) except under clauses 21.2, 21.3, 21.4 or 21.5. [The “Business” is defined by Clause 1.1 as “the business of conducting a supermarket carried on by (Hourigan’s) at the (Supermarket) Premises”.]

21.2 Notice of Sale

If the Purchaser wants to sell the Sale Business it must serve a notice of sale on the Vendor specifying:

(a) the sale price of the Sale Business;

(b) all other terms and conditions of the proposed sale; and

(c) a statement to the effect that the Vendor or its nominee has an option to purchase the Sale Business on the terms set out in the Notice of Sale if the Vendor complies with clause 21.3 (“Notice of Sale”).

21.3 Exercise of Vendor’s Option to Purchase

(a) The Vendor can exercise its option to purchase the Sale Business by giving notice to the Purchaser within 14 days after the date of service of the Notice of Sale.

(b) If the Vendor exercises its option to purchase the Sale Business then the Purchaser must sell the Sale Business to the Vendor or its nominee and the Vendor must purchase the Sale Business or procure that its nominee purchases the Sale Business on the terms set out in the Notice of Sale.

21.4 Sale Business not Purchased by Vendor

(a) Subject to this clause 21.4, if the Sale Business is not purchased by the Vendor or its nominee within 14 days after the date of service of the Notice of Sale, the Purchaser can sell the Sale Business to a third party.

(b) The Purchaser must not sell the Sale Business:

(i) for a purchase price lower than the price specified in the Notice of Sale by 10% or more; or

(ii) on terms substantially more beneficial to the buyer than those set out in the Notice of Sale.”

12    By agreement dated 27 October 1999 between Metcash and Hourigan’s, Hourigan’s agreed to purchase from Metcash products for re-sale to the public at the supermarket (“the Supply Agreement”). It is worthy of note that Recital A to the Supply Agreement records: “The parties operate in the grocery and supermarket industry which is a highly competitive industry dominated by Coles, Woolworths and Franklins Supermarkets” .

13    Completion of the Agreement for Sale was duly effected on 27 October 1999 and the Supermarket Lease was transferred by Jewel to Hourigan’s. Transfer of the Lease was effected by a Deed of Assignment dated 27 October between KLVC as Lessor, Jewel as Assignor, Hourigan’s as Assignee, and the Messrs Hourigan as Guarantors.

14    Clause 1 of the Deed of Assignment provided:
“The Assignees covenant with the Lessors [sic] and the Assignor severally that they will henceforth during the residue of the term of the Lease and any extension or renewal thereof duly and punctually pay all rent and other moneys to the Lessors as and when the same shall become due and payable under the Lease and will duly and punctually observe and perform each and every of the covenants, conditions, terms and obligations on the part of the Assignor contained or implied in the Lease as if the Assignees were the original Lessees named in the Lease AND will henceforth keep the Assignor indemnified from and against all actions, proceedings, claims, costs, expenses, damages and demands for or in respect of non-payment of rent and other moneys under the Lease and the breach, non-performance or non-observance of all or any of the covenants and conditions in the Lease either express or implied.”

Clause 7 provided:

“The Lessor covenants with the Assignor that it will, during the remainder of the term of the Lease, any options and periods of holding over:

(a) obtain the Assignor’s consent, which consent cannot be unreasonably withheld, before the Lessor consents to any future assignment, sublease or variation of the Lease;

(b) promptly notify the Assignor of any default by the Assignee in respect of the Assignee’s obligations under the Lease;

(c) terminate the Lease at the request of the Assignor in writing if the default notified to the Assignor under clause 7(b) has not been rectified within 14 Days; and

(d) grant a new lease of the Premises to the Assignor on the same terms as the Lease commencing on the date of termination of the Lease under clause 7(c) if the Lease is terminated under that clause.”

15    The transfer of the Supermarket Lease to Hourigan’s was registered under the Real Property Act 1900 (NSW). Neither the Deed of Assignment nor the Agreement for Sale was registered or otherwise noted on the title to the Supermarket Premises.

16    In April 2002, Coles and Bi-Lo expressed interest in purchasing the Supermarket Business from Hourigan’s. Negotiations continued until 29 November 2002 when an Asset Sale Agreement was entered into between Hourigan’s and Bi-Lo. On the same day, Coles entered into an agreement with KLVC to purchase the Supermarket Premises. That contract was completed on 28 January 2003 and Coles is now the registered proprietor of the Supermarket Premises.

17    The Amended Statement of Claim alleges that Hourigan’s has never given to Metcash a Notice of Sale in accordance with the provisions of Clause 21.2 of the Agreement for Sale, in breach of that clause. In its Defence filed in Court on 15 April Hourigan’s admits that it entered into the Asset Sale Agreement with Bi-Lo and that it has not given to Metcash a Notice of Sale but it does not admit that it has committed a breach of Clause 21.2 of the Agreement for Sale. When asked what was the substance of Hourigan’s defence to the allegation of breach of contract, Mr Duggan was unable to say. As matters presently stand, therefore, I conclude that Hourigan’s has committed a clear breach of Clause 21.2 of the Agreement for Sale. Bearing in mind the fact that Hourigan’s was tied to Metcash in its day-to-day conduct of the Supermarket Business through the Supply Agreement, there is a strong inference available that failure on Hourigan’s part to comply with the its obligation under Clause 21.2 of the Agreement for Sale was not the result of oversight but was deliberate.

18    The Asset Sale Agreement contains the following Warranty by Hourigan’s in Clause 1.2 of the Sixth Schedule to the Agreement:
“[Hourigan’s] has the legal right and power to enter into this Agreement and to sell the Assets to [Bi-Lo] on the terms set out in this Agreement and there is no contractual or legal impediment to Completion occurring in the manner contemplated by this Agreement.”

In Clause 1.3 Hourigan’s warrants:
“The entry into, and the sale of the Assets pursuant to, this Agreement by [Hourigan’s] do not result in a breach of any obligation or constitute a default under … any agreement or undertaking by which [Hourigan’s] is bound.”

19    Clause 4.1(b) of the Asset Sale Agreement provides, in so far as is presently relevant, that Bi-Lo is not obliged to complete the purchase of the Assets if Bi-Lo becomes aware of any fact, not known to it before the date of the Agreement, that constitutes or would constitute a breach of any Warranty.

20    By letter dated 24 February 2003, Hourigan’s solicitors notified Bi-Lo’s solicitors that the sale of the Supermarket Business to Bi-Lo was subject to prior pre-emptive rights held by Metcash. By letter dated 28 February 2003, Bi-Lo’s solicitors responded that Hourigan’s was in clear breach of Warranty Clauses 1.2 and 1.3, inter alia. The letter concluded by stating that Bi-Lo unconditionally reserved all of its rights and remedies to damages, performance, and otherwise arising consequent upon Hourigan’s breach of the warranties.

21    Notwithstanding that by 24 February 2003 at the latest, Bi-Lo was aware of Metcash’s pre-emptive right and that Bi-Lo was entitled to terminate the Asset Sale Agreement, Bi-Lo elected to proceed with the purchase of the Supermarket Business from Hourigan’s. By letter dated 3 April 2003, Bi-Lo’s solicitors wrote to Hourigan’s solicitors referring to the letter of 28 February and insisting on settlement of the Asset Sale Agreement on 4 April 2003.

22    It is apparent that although neither Hourigan’s nor Bi-Lo notified Metcash on or prior to 29 November 2002 that the Asset Sale Agreement had been entered into, Metcash became aware, at least in February 2003, that Hourigan’s intended to sell the Supermarket Business. On 18 February 2003, Hourigan’s wrote to Metcash giving notice of Hourigan’s intention to terminate the Supply Agreement as at 4 April 2003. On 27 February Metcash responded, stating that three months’ written notice of termination was required under the Supply Agreement and concluding: “We await receipt of the Notice of Sale referred to in Clause 21.2 of the [Agreement for Sale] dated 23 September 1999” .

23    On 14 March 2003, a director of Hourigan’s informed an officer of Metcash that Hourigan’s had entered into a “Heads of Agreement with Coles” to sell the Supermarket Business to Coles. In a letter dated 20 March to Hourigan’s, Metcash’s solicitors drew attention to the requirements of Clause 21 of the Agreement for Sale, noted that no Notice of Sale had been received, and stated that unless a Notice of Sale was received by Metcash by 5pm on 24 March and that it was confirmed that the “Heads of Agreement with Coles” had been terminated, legal proceedings would be commenced by Metcash and an injunction would be sought.

24    On the same day, 20 March, Metcash’s solicitors wrote to Coles advising, inter alia, of Metcash’s pre-emptive right under the Agreement for Sale and stating that Metcash would commence proceedings seeking an injunction to restrain the sale if the agreement to sell the Supermarket Business to Coles was not terminated.

25    By letter dated 25 March, Hourigan’s solicitors advised Metcash’s solicitors that Hourigan’s gave an undertaking “not to enter any agreement for sale or complete any agreement for sale” of the Supermarket Business without first giving a minimum 48 hours’ prior notice to Metcash.

26    By letter dated 28 March, Coles’ and Bi-Lo’s solicitors advised Metcash’s solicitors that Metcash’s pre-emptive right in the Agreement for Sale was a matter between Metcash and Hourigan’s, and that Coles had entered into a binding contract with Hourigan’s for the acquisition of the Supermarket Business in good faith, without notice of Metcash’s pre-emptive right. The letter advised that Coles would require Hourigan’s to complete the Asset Sale Agreement and that if Metcash had any claims, it could pursue them against Hourigan’s.

27    By facsimile sent on 8 April, Hourigan’s solicitors gave notice to Metcash’s solicitors that after the expiry of 48 hours Hourigan’s intended to regard itself as released from the undertaking given by its letter of 25 March. By a further facsimile sent on 8 April, Hourigan’s solicitors advised Metcash’s solicitors of the commencement of the Bi-Lo Proceedings on 7 April and that those proceedings had been stood over to 9 April before the Duty Judge.

28    By letter dated 15 April, Coles’ solicitors advised Metcash’s solicitors that Coles proposed to accept a surrender by Hourigan’s of the Supermarket Lease. If the surrender occurred, it would be impossible for Hourigan’s thereafter to comply with its obligation under Clause 21.3 of the Agreement for Sale to sell the “Sale Business” back to Metcash if Metcash’s exercised the Option to Purchase. That is so because the “Sale Business” is, by definition, the Supermarket Business conducted “at the [Supermarket] Premises” . Hourigan’s, being neither the owner nor any longer the lessee of the Supermarket Premises, could not sell the right to conduct the business at the Supermarket Premises. Further, if the surrender occurred, Coles as the successor in title to KLVC, would no longer be required to obtain Jewel’s consent under Clause 7(a) of the Deed of Assignment to an assignment of the Supermarket Lease to Bi-Lo, nor would it be bound by the other provisions of Clause 7.

29    At the conclusion of argument yesterday, Mr Douglas on behalf of Coles and Mr Duggan on behalf of Hourigan’s, gave an undertaking up to 11am today to take no step to implement the proposed surrender of the Supermarket Lease.

Whether serious question to be tried

30    The principal difference between the causes of action pleaded in the Amended Statement of Claim and those referred to in Exhibit P4 as intended to be pleaded in a Further Amended Statement of Claim is that Exhibit P4 contains a claim for relief under the Trade Practices Act 1974 (Cth). Mr Douglas complains that it is impossible to deal with the Trade Practices Act claims because they are not properly pleaded or particularised. However, while improvements and refinements will doubtless be made in the Further Amended Statement of Claim, paragraphs 63 to 71 of Exhibit P4 set out with sufficient clarity for the purposes of this application the nature of the Plaintiffs’ claims under the Trade Practices Act against Hourigan’s. Likewise, paragraphs 72 and 73 set out sufficiently the nature of the Trade Practices Act claims to be made against Coles and Bi-Lo.

31    The essence of the Trade Practices Act claim against Hourigan’s may be summarised thus. There were continuing representations by Hourigan’s to Jewel that Hourigan’s would perform its obligations under Clause 21 of the Agreement for Sale and would use its best endeavours to preserve the Supermarket Lease for the benefit of Metcash and Jewel. The representations were principally constituted by the silence of Hourigan’s in failing to disclose to Metcash and Jewel that it proposed to enter into the Asset Sale Agreement with Bi-Lo and proposed to assign the Supermarket Lease to Bi-Lo, without giving a Notice of Sale to Metcash under the Agreement for Sale. Failure to disclose that state of affairs until after the agreement with Bi-Lo had already been entered into was likely to mislead or deceive Metcash and Jewel into taking no action to prevent agreements coming into existence which could defeat their rights, as would have been the case had a Notice of Sale been given or had disclosure of the state of affairs otherwise been made. Such conduct by Hourigan’s contravenes s.52 and s.53A(1)(b) Trade Practices Act . By reason of such conduct Metcash and Jewel have suffered, or are likely to suffer loss in that their rights under the Agreement for Sale and the Deed of Assignment may be defeated by the equitable rights of Bi-Lo and Coles which have now come into existence and are said to have been acquired for value and without notice of the prior rights of Metcash and Jewel. Relief is sought under s.80 and s.87 of the Trade Practices Act . Under those sections a Court has wide discretionary powers to make orders against Hourigan’s so as to prevent loss being suffered by Metcash and Jewel. Accordingly, if the status quo is preserved in the meantime, it is possible that at a final hearing the Court could make an order restraining Hourigan’s from completing the sale of the Supermarket Business to Bi-Lo and from surrendering the Supermarket Lease to Coles despite the fact that equitable interests of Bi-Lo and Coles have intervened and that a Court of Equity would refuse relief. The Court could order Hourigan’s to perform its obligations under Clause 21 of the Sale Agreement and Coles to perform its obligations under Clause 7 of the Deed of Assignment (if such obligations continue to bind Coles). Bi-Lo and Coles would then be left with their remedies in damages against Hourigan’s. The Court could make these orders even if Coles and Bi-Lo were not knowingly concerned in Hourigan’s contraventions of the Act.

32 As against Coles and Bi-Lo, Metcash and Jewel claim that those companies were knowingly concerned, within the meaning of s.75B of the Trade Practices Act , in the contraventions of the Trade Practices Act by Hourigan’s. The claims are particularised at some length in paragraph 72 of Exhibit P4. For the sake of brevity in a judgment required urgently, I incorporate the particulars of those claims here by reference. It is said that if knowing participation on the part of Coles and Bi-Lo is made out at the trial, relief under s.80 and s.87 Trade Practices Act may be granted against them which has the effect of enabling Metcash and Jewel to secure the rights which have been granted under Clause 21 of the Agreement for Sale and under the Deed of Assignment.

33    Mr Douglas urges strongly that Metcash and Jewel have adduced no evidence at all casting doubt on Coles’ and Bi-Lo’s assertion that they entered the Asset Sale Agreement without knowledge of Metcash’s pre-emptive right. This is correct, as Mr Lindsay SC, who appears for Metcash and Jewel, concedes. However, Mr Lindsay repeats his submission, noted above, that effective relief under the Trade Practices Act can be given against Hourigan’s even if Coles and Bi-Lo were not knowingly concerned in Hourigan’s contraventions of the Act.

34    I take into account that the relief claimed against Hourigan’s, Coles and Bi-Lo will depend to a great extent upon what evidence is adduced at the trial as to what happened between those parties, and what was known to Coles and Bi-Lo, between April 2002, when Coles began negotiating with Hourigan’s, and 29 November 2002, when the Asset Sale Agreement and the Contract for Purchase of the Supermarket Premises were entered into. I take into account that at this early stage of the proceedings, discovery and inspection have not been had and that extremely limited time for investigation of the facts has been afforded to Metcash and Jewel. I take into account that the limited time for investigation arises, to a large degree, because Hourigan’s kept Metcash and Jewel in the dark as to what it was intending to do with the Supermarket Business from April 2002 to until March 2003. I take into account also that Coles and Bi-Lo did not inform Metcash and Jewel of their agreements with Hourigan’s as soon as they were informed of the pre-emptive right of Metcash on 24 February 2003. I take into account also that Coles and Bi-Lo brought specific performance proceedings against Hourigan’s at very short notice and that Metcash and Jewel were given less than a day’s notice that the specific performance proceedings were to be heard on 9 April.

35    I take into account also that despite these difficulties Metcash and Jewel have been able to formulate a claim for relief which is by no means devoid of particularity and which cannot be said to be fanciful. It is possible that further evidence will be unearthed as the interlocutory steps towards trial proceed which will substantiate the Trade Practices Act claims against both Hourigan’s and Coles and Bi-Lo.

36    In these circumstances, I cannot conclude at this stage of the proceedings that the Trade Practices Act claims made against Hourigan’s, Coles and Bi-Lo do not raise serious questions to be tried.

37    In the light of this conclusion it is not necessary for me to deal at length with the other causes of action raised against Hourigan’s, Coles and Bi-Lo. They are expounded in detail in Exhibit P4 and they are answered elaborately and at length in the written submissions of Hourigan’s and Coles and Bi-Lo. It is sufficient to say that those causes of action involve such difficult questions as:


– whether on the true construction of Clause 21 of the Agreement for Sale Metcash has a mere equity to restrain a breach of a negative covenant or an equitable interest;

– whether, as a matter of fact, Bi-Lo had notice of Metcash’s pre-emptive right prior to entry into the Asset Sale Agreement;

– whether, if Bi-Lo had such notice, an injunction should be granted to protect what, at this stage, is no more than a pre-emptive right, as was done in DC Thomson & Co Ltd v Deakin [1952] Ch 646, and in Carlton & United Breweries Ltd v Tooth & Co Ltd (unrep., 14 February 1990 NSWSC, Waddell J);

– whether on the true construction of the Deed of Assignment the obligations of the lessor concern the subject matter of a lease and are therefore within the operation of s.118 of the Conveyancing Act 1919 (NSW);

– whether on the true construction of the Deed of Assignment in the light of the circumstances in which that Deed and the Agreement for Sale were entered into, there is an express or implied obligation on the lessor, now Coles, not to accept a surrender of the Supermarket Lease which will have the effect of destroying the rights of Jewel under the Deed of Assignment.


38    There are other issues as well which it would be pointless to elaborate upon. It is sufficient to say that, in my view, this case is not one in which the issues are readily susceptible of resolution at an interlocutory hearing on the evidence readily available: see Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533, at 535-536. On the contrary, it is abundantly clear that all of these issues could not be determined except in the light of all relevant facts adduced at trial. I am satisfied that at this stage of the proceedings serious questions to be tried have been demonstrated.

Balance of convenience

39    Mr Lindsay submits that the balance of convenience strongly favours the grant of an interlocutory injunction; Messrs Douglas and Duggan submit that the balance of convenience requires its refusal.

40    Mr Lindsay says that damages are not an adequate remedy because the subject matter of dispute is a substantial trading business, with the benefit of a long-term lease and with highly important strategic consequences to the operations of Metcash and Jewel in a highly competitive industry. The evidence given by Mr Carlile, National Business Development Manager of Metcash, supports this contention.

41    It is clear that if an injunction is refused and the sale of the Supermarket Business to Bi-Lo proceeds, it will be very difficult, if not impossible, to restore Metcash and Jewel to their rights under Clause 21 of the Agreement for Sale and under the Deed of Assignment if they ultimately succeed at trial. Bi-Lo will have gone into occupation of the Supermarket Premises and will doubtless have spent a considerable sum in improvements to the premises and to the business. Further, the character of the rights of Bi-Lo will have changed from equitable rights to legal rights; the Supermarket Lease will have been surrendered so that there will be nothing upon which the rights contained in Clause 7 of the Deed of Assignment can operate.

42    In other words, if an injunction is refused and the status quo is not preserved, it may well be that Metcash and Jewel are, as a matter of reality, confined to a remedy in damages which is not, in my view, an adequate remedy in the circumstances which I have outlined.

43    On the other hand, Bi-Lo and Hourigan’s point to a number of factors giving rise to hardship and inconvenience if the injunction is granted. Hourigan’s says that delay in completion of the sale to Bi-Lo is causing uncertainty and concern amongst the supermarket staff, that staff are leaving and not being replaced, that stock is being run down and not replaced, and that the goodwill of the business is being severely prejudiced.

44    All of this may well be true but it is, nevertheless, a misfortune which Hourigan’s has brought upon itself by a breach of Clause 21 of the Agreement for Sale which, I infer, was not only deliberate but which was concealed by Hourigan’s from Metcash and Jewel until the last minute. I cannot give weight to the hardship pleaded by Hourigan’s when it is the product of its own wrongdoing.

45    Bi-Lo also relies upon the damage to the Supermarket Business which would be caused by delay in completing its purchase. It says that the business which it is purchasing will be wasted away. However, I take into account that:


– the purchase money for the business has not yet been paid in full by Bi-Lo to Hourigan’s;

– Bi-Lo and Coles were given clear notice of Metcash’s pre-emptive right by Hourigan’s on 24 February 2003 – they then had the right under the Asset Sale Agreement not to proceed with the purchase, but they chose to proceed nevertheless;

– on 20 March 2003 Metcash’s solicitors advised Coles’ and Bi-Lo’s solicitors that an injunction would be sought to restrain the sale by Hourigan’s if it was not terminated, yet Coles and Bi-Lo still did not elect to terminate the sale – they proceeded, conscious of the risk of an injunction.


46    Bi-Lo says that it has expended approximately $400,000 in expenses and staff costs in relation to the purchase of the Supermarket Business. From the affidavit of Mr Pollock, an officer of Coles, it appears that the considerable bulk of that expenditure, if not all of it, was incurred after 24 February 2003, when Coles and Bi-Lo had been informed of Metcash’s pre-emptive right and had elected to proceed with the sale nevertheless. It seems also that a great deal of that expenditure was incurred after 20 March 2003, when Coles was informed that an injunction would be sought if the sale was not terminated. Accordingly, it seems clear that most, if not all, of the expenditure incurred by Bi-Lo has been undertaken by Coles and Bi-Lo in the full knowledge of the risks involved if an injunction was sought by Metcash and Jewel and granted. I cannot, therefore, give great weight to this alleged hardship.

47    Coles says that it has already expended $3.5M in the purchase of the Supermarket Premises from KLVC. That is certainly correct. However, there is no evidence that the Supermarket Premises are not worth $3.5M. It may be that, if Metcash and Jewel ultimately succeed at trial, Coles will find itself in the curious position of landlord to a major competitor. That in itself is no reason to refuse the injunction.

48    Finally, Coles and Bi-Lo say that Metcash will suffer no loss if an injunction is refused because Metcash has not stated that if a Notice of Sale were to be given it would exercise the Option to Purchase which thereupon comes into existence. Mr Lindsay responds, correctly, that at this stage Metcash can do no more than say, as it has done, that it is highly interested in exercising the Option to Purchase because, until a Notice of Sale is given, it does not know the terms of the Option. He says, rightly, that the calculation of the Option price to Metcash is not straightforward because the sale price to Bi-Lo was calculated by reference to whether a sale of the Supermarket Premises to Coles would proceed. I accept the evidence of Mr Carlile that the Supermarket Business at Umina is of great strategic importance to Metcash and that it is ready, willing and able to proceed with the purchase of the Supermarket Business if the terms offered in the Notice of Sale to be given by Hourigan’s are appropriate.

Proposed orders

49    For the above reasons, in my view the balance of convenience strongly favours the preservation of the status quo by the grant of an injunction restraining completion of the sale of the Supermarket Business to Bi-Lo and the surrender of the Supermarket Lease to Coles.

50    Conditionally upon the usual undertaking as to damages being proffered by the Plaintiffs, I propose to make the order sought in paragraph 1 of the Plaintiffs’ Notice of Motion and to grant an interlocutory injunction restraining Hourigan’s from surrendering to Coles the Supermarket Lease. I have not been addressed on the order sought in paragraph 2 of the Notice of Motion and I do not know if it is still sought.

51    I will, if the parties wish, give directions as to the joinder of parties, the amendment of pleadings and such other directions as will ensure that these proceedings can be heard on an expedited basis.

52    I will stand the proceedings over for a short time for the bringing in of Short Minutes of Order in accordance with these reasons. I will then hear argument as to costs.

– oOo –

Last Modified: 04/17/2003