Orora Ltd v Lindsay Australia Ltd
[2015] VSC 197
•1 APRIL 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2015 01386
| ORORA LIMITED | Applicant |
| v | |
| LINDSAY AUSTRALIA LIMITED | Respondent |
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JUDGE: | RIORDAN J |
WHERE HELD: | MELBOURNE |
DATE OF HEARING: | 31 MARCH 2015 |
DATE OF JUDGMENT: | 1 APRIL 2015 |
CASE MAY BE CITED AS: | ORORA LTD v LINDSAY AUSTRALIA LTD |
MEDIUM NEUTRAL CITATION: | [2015] VSC 197 |
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INJUNCTION — Interlocutory injunction application to compel performance of distribution agreement — Serious question to be tried — Balance of convenience — Inadequacy of damages — Whether mandatory or prohibitive — Interim injunction granted.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr S Horgan QC with Ms E Murphy | Minter Ellison |
| For the Respondent | Mr D Fraser QC with Mr B Mason | McCullough Robertson Lawyers |
HIS HONOUR:
The applicant in this proceeding seeks interim relief in substance to compel continued performance of a distribution agreement, which it entered into with the respondent on 10 July 2009 (the ‘2009 Distribution Agreement’), together with certain discovery orders. The 2009 Distribution Agreement includes an arbitration agreement, but the abovementioned relief is sought pursuant to s 17J of the Commercial Arbitration Act 2011 (Vic) which provides as follows:
(1)The Court has the same power of issuing an interim measure in relation to arbitration proceedings as it has in relation to proceedings in courts.
(2)The Court is to exercise the power in accordance with its own procedures taking into account the specific features of a domestic commercial arbitration.
For the purpose of this interim application, the parties agree that the Court has power to deal with an urgent application for an injunction and other relief pursuant to the specific provision to that effect in cl 28.5 of the 2009 Distribution Agreement.
The claims
The applicant is a fibreglass and beverage packaging manufacturer and distributor. The respondent is a transport logistics and rural supply company. The respondent has distributed the applicant's corrugated fibreboard packaging products to customers through its rural stores division. Those customers are predominantly fruit and vegetable growers who use the respondent's transportation services, including the provision of packaging products, which are provided by the applicant.
The present dispute concerns the 2009 Distribution Agreement which commenced on 1 July 2009 and, in particular, the applicant's supply of packaging material from 1 January 2015 directly to a grower, Simpson Farms Pty Ltd (‘Simpson Farms’), which had previously been supplied by the respondent under the 2009 Distribution Agreement. The respondent claims that:
(a) such supply by the applicant is in breach of cl 10.3 of the 2009 Distribution Agreement;
(b) the breach, among other conduct, amounted to a repudiation of the 2009 Distribution Agreement; and
(c) it has accepted the applicant’s repudiation.
The applicant claims that the respondent wrongfully terminated the 2009 Distribution Agreement for alleged repudiation. It does not accept that the 2009 Distribution Agreement is at an end and seeks performance of it.
Summary of the facts
On 24 July 2002, the applicant (then Amcor), the respondent and P & H Supplies Pty Ltd (‘P&H’) entered into a distribution agreement which, according to the recitals, was to ‘provide a total rural solution package, incorporating transport of goods, packaging and packing sheds and cold stores for rural merchandise’ (the ‘2002 Distribution Agreement’).
The 2002 Distribution Agreement replaced a prior distribution agreement dated 1 February 1999. Relevantly, pursuant to the 2002 Distribution Agreement, provision was made for all the growers which P & H supplied to enter into new tripartite agreements in an annexed form with P & H and the applicant.
By a growers supply agreement dated 20 August 2007 (the ‘2007 Simpson Farms Growers Supply Agreement’), the applicant, the respondent (there expressed as ‘trading as Lindsay Rural’) and Simpson Farms entered into an agreement pursuant to the terms of the 2002 Distribution Agreement.
By the 2009 Distribution Agreement, the applicant and the respondent entered into a contract to replace the 2002 Distribution Agreement which was to terminate on 31 October 2009. The term of the 2009 Distribution Agreement was to be from 1 July 2009 to 30 June 2016. The 2009 Distribution Agreement relevantly included the following terms:
10 Contracts with Growers
10.1The Rural Companies, Lindsay and Amcor agree that all Growers Contracts as at the date of this Agreement which have not expired or been terminated shall continue until they expire or are terminated (as the case may be) in accordance with their terms.
10.2Lindsay and Amcor each agree that they will not, and Lindsay will procure that the Rural Companies will not, agree to any variation of any of the Growers Contracts including, without limitation, in relation to the extension of the term of any of the Growers Contracts.
10.3Lindsay and Amcor each agree that immediately following expiry of a Growers Contract, all supply of Product to the party to that contract shall be made in accordance with the terms of this Agreement.
Under the definitions section, ‘Rural Companies’ are defined to be four named companies each being a wholly owned subsidiary of the respondent and part of the Lindsay Group. The respondent is not one of those companies.
‘Growers’ are defined as ‘customers of the Rural Companies that they supply with Products pursuant to [the 2009 Distribution Agreement]’.
‘Growers Contracts’ are defined as ‘contracts between Amcor, the Rural Companies and the Growers entered into pursuant to the terms of the Old Agreement [being a reference to the 2002 distribution agreement]’.
After expiration of the 2007 Simpson Farms Growers Supply Agreement on 30 September 2009, Simpson Farms and the respondent entered into a new growers supply agreement, the period of which was from 2 March 2010, being the date of signing, to 31 December 2014 (the ‘2010 Simpson Farms Growers Supply Agreement’).
From 16 June to 8 July 2014, there was correspondence between the applicant and the respondent in which the respondent contended that the applicant would be in breach of cl 10.3 if it were to supply directly to Simpson Farms. The applicant responded that it was entitled to supply direct to Simpson Farms after the expiry of the 2010 Simpson Farms Growers Supply Agreement because it was not a Growers Contract as defined by the 2009 Distribution Agreement. After the expiry of the 2010 Simpson Farms Growers Supply Agreement on 31 December 2014, the applicant started to supply directly to Simpson Farms. As a result, the following correspondence followed.
A letter dated 23 February 2015 from Mr Kim Lindsay, Chief Executive Officer and Managing Director of the respondent to Mr Brian Lowe, Group General Manager Corrugated of the applicant, stated the following:
1I wrote to Orora in June last year on a number of occasions about Simpson Farms, expressing my concern that Orora was proposing to offer pricing and supply of Product to this customer, which was a party to a Growers Contract as described in the Distribution Agreement between Lindsay and Orora. I drew attention to clause 10.3 of the Distribution Agreement and advised that if Orora did proceed, that would cause loss and damage to the Lindsay [sic] at which time Lindsay would consider all legal options to prevent or remedy such a breach and requested that Orora comply with the Distribution Agreement.
2The response I received was that Orora intended to proceed to provide Simpson Farms with supply options at the expiration of the Supply Agreement that Lindsay Rural then had with Simpson Farms.
3It has come to my attention that, notwithstanding my correspondence to Orora, it has proceeded on that course and, in breach of the Distribution Agreement, is now supplying Product directly to Simpson Farms in circumstances where that Product should only have been supplied by Lindsay.
4As you know, Simpson Farms was a major customer of Lindsay with an annual turnover of Product of approximately $1.5M. Simpson Farms had been a customer of Lindsay over a long period of time and at the time the Distribution Agreement was entered into, both it and Orora (then called Amcor Packaging) were parties to a Growers Contract with Lindsay which was dated 20 August 2007. As Orora also knows, Lindsay’s customers who are supplied with Product under the Distribution Agreement, and who were formerly parties to such Growers Contracts, now constitute of the order of 30-40% of the customers to whom Lindsay provides Product under the Distribution Agreement. It is accordingly, very concerning to Lindsay that not only has Orora commenced supplying Simpson Farms, but is also making approaches to other customers of Lindsay in that category to seek to supply Product to them. As examples, I refer to the approaches made to Zaina, Curino, and Donovan. Those approaches are also in breach of the Distribution Agreement and, clearly, Orora plans to further breach the Distribution Agreement by supplying Product to such customers. The approaches also have an adverse effect on Lindsay’s ability to successfully and profitably market Product to such customers.
5It seems plain that unless matters change, Orora intends to continue to approach Lindsay’s customers in that category and to take over the supply of Product which Lindsay presently provides under the Distribution Agreement. As Orora would also know, that course will have severe impacts upon the profitability of Lindsay’s businesses and is an intolerable position for Lindsay to be put in.
6The importance of this matter is such that it has been considered at board level by Lindsay and I am writing this letter to make it clear to Orora that Lindsay regards its conduct as being in serious breach of the Distribution Agreement and requires the breaches to be remedied within 30 days of the date of this letter.
7Lindsay requires, based on its present understanding of the conduct of Orora as described above, that the breaches be remedied by Orora taking the following steps:
(a)Orora must account to Lindsay or otherwise pay compensation to Lindsay for the profits that Lindsay would have made, but which have now been made by Orora, in the supply of Product to Simpson Farms. Orora should also pay compensation to Lindsay for any other losses suffered by it occasioned by the approaches to such customers. If agreed, Orora and Lindsay can jointly appoint an accountant experienced in such matters, at Orora’s expense, to assess that amount;
(b)Orora must cease supplying Product to Simpson Farms directly and must either renegotiate whatever contract it has made with Simpson Farms so that Lindsay is substituted as the supplier of Product or, if that is not possible, subcontract with Lindsay to be the provider of Product, on terms in each case that will secure to Lindsay the benefits it would have received if Orora had not intruded;
(c)Orora must undertake to Lindsay that it will not supply Product to any customers of Lindsay who are in the category of a party to a Growers Contract referred to in the Distribution Agreement, except through Lindsay pursuant to the Distribution Agreement. Orora must also undertake to Lindsay that it will not make any further approaches to such customers to seek to supply Product to them.
8 On behalf of Lindsay, I reserve all rights otherwise.
By letter dated 4 March 2015 to Mr Lindsay, Mr Lowe stated:
I refer to your letter dated 23 February 2015, which we are currently considering.
In paragraph 7 of your letter you require that Orora take various steps, including at paragraph 7(c) that Orora ‘undertake to Lindsay that it will not supply Product to any customers of Lindsay who are in the category of a party to a Growers Contract referred to in the Distribution Agreement, except through Lindsay pursuant to the Distribution Agreement’. You also require that Orora ‘undertake to Lindsay that it will not make any further approaches to such customers to seek to supply Product to them’.
So that we may properly consider the requests made in your letter and respond to your correspondence (but without admission that any breach of the Distribution Agreement has occurred), please identify by return correspondence the customers whom Lindsay considers fall within the description contained in paragraph 7(c) of your letter.
This information is also required to enable proper consideration of the request contained in paragraph 7 of your letter.
I look forward to your prompt response.
By letter dated 5 March 2015 to Mr Lowe, Mr Lindsay stated:
1 I refer to your letter dated 4th March 2015.
2You have requested that we identify the customers that we think fall within paragraph 7(c) of our letter dated 23rd February 2015. Given our desire to resolve this matter quickly pursuant to the terms of our letter of 23rd February, we do not require that Orora agree to a customer exclusion list at this time, or that the parties engage in discussions regarding the status of any customers.
3In accordance with our letter of 23rd February we confirm our view that Simpson Farms, Zaina, Curino and Donovan would fall into this category of customer under paragraph 7(c) of our letter of 23rd February. This is not a complete list of customers that might fall into this category, nor indeed a comprehensive list of customers being supplied pursuant to the Distribution Agreement.
4We would suggest as an interim solution where there is doubt or confusion regarding the status of any customer that the parties engage in good faith discussions to resolve the matter, thereby not delaying resolution of the matters raised in our letter of 23rd February 2015.
5 We look forward to your response to our letter of 23 February 2015.
By letter dated 16 March 2015 to Mr Lindsay, Mr Lowe stated:
I refer to your letter dated 23 February 2015 and your further letter dated 5 March 2015 responding to my letter of 4 March 2015.
Your letter of 23 February 2015 asserted that Orora had breached the Distribution Agreement by supplying Simpson Farms following the expiration of Lindsay’s supply agreement with Simpson Farms.
The basis for this assertion appears to be that Simpson Farms, Lindsay and Orora were parties to an agreement dated 20 August 2007 at the time the Distribution Agreement was entered into and that clause 10.3 of the Distribution Agreement applies.
Your letter does not note that the August 2007 agreement between Simpson Farms, Lindsay and Orora expired on or about 30 September 2009 and that Simpson Farms and Lindsay subsequently entered into a new supply agreement the term of which expired at the end of 31 December 2014.
Orora confirms that it intends to fully perform its obligations under the Distribution Agreement and is ready, willing and able to do so. It does not, however, agree that entry into any supply arrangements with Simpson Farms following expiry of the agreement entered into between Lindsay and Simpson Farms in or about 2009 constitutes a breach of the Distribution Agreement.
I note in this regard that clause 10.3 of the Distribution Agreement applies to the entry into contracts immediately following expiry of a Growers Contract. The three way agreement between Simpson Farms, Orora and Lindsay expired in September 2009. A supply contract between Simpson Farms and Lindsay was entered into immediately following expiry of the three way agreement. On Orora’s reading of the Distribution Agreement, clause 10.3 does not extend to contracts which are subsequently entered into.
Orora does not consider that it is or would be in breach of the Distribution Agreement in the circumstances set out in your letter, and as such does not propose to take the steps set out in paragraphs 7(a), (b) and (c) of your letter of 23 February 2015 (as modified by your letter of 5 March 2015).
Orora would however like the parties to have a shared view of the operation of clause 10.3 of the Distribution Agreement to avoid any confusion or incorrect views. On that basis, I suggest that the parties meet to discuss these matters on a ‘without prejudice’ basis. Please confirm whether you agree that such discussions should be arranged.
By letter dated 20 March 2015 to Mr Lowe, Mr Lindsay stated:
1Thank you for explaining Orora’s interpretation of its obligations under the Distribution Agreement.
2I cannot agree with that interpretation. It seems to me to make no sense to suggest that, once the Growers Contract came to an end, because the supply by Lindsay to Simpson Farms of Product occurred pursuant to a contract between Lindsay and Simpson Farms, that entitled Orora to disregard its promise in clause 10.3 of the Distribution Agreement. How else could Product be supplied under the Distribution Agreement by Lindsay to such a grower, if not through a contract? The complete lack of logic or commercial reality attaching to the explanation is, in itself, quite concerning.
3Accordingly, unless Orora is able to identify some tenable basis on which Orora says that it is entitled to supply Product directly to Simpson Farms, I do not see any point in arranging a meeting on a ‘without prejudice’ basis.
4 Lindsay continue to reserve all of its rights.
By letter dated 25 March 2015 to Mr Lowe, Mr Lindsay stated:
I refer to my letter of 23 February 2015, and to our subsequent exchange of correspondence, and in particular, to your letter dated 16 March 2015.
My letter of 23 February 2015 required Orora to remedy its breach of the Distribution Agreement within 30 days (that is, by 25 March 2015). My letter described the steps Orora should take to remedy that breach. On 19 March 2015 I wrote pointing out that the explanation offered in your letter dated 16 March 2015 as justifying Orora’s conduct made no sense and was itself concerning.
Orora has failed to take any steps to remedy its breach of the Distribution Agreement. It is quite clear from your letter dated 16 March 2015, and Orora’s course of conduct, that Orora intends to continue in its serious breach of the agreement. Plainly Orora does not intend to be bound by the terms of the Distribution Agreement and has repudiated its obligations under the agreement.
Accordingly, Lindsay hereby accepts that repudiation, and elects to treat the Distribution Agreement as being at an end. Lindsay reserves all of its rights to claim damages in relation to such repudiation, including with respect to the breaches of the Distribution Agreement referred to in my letters of 23 February 2015 and 19 March 2015.
I look forward to making suitable arrangements in connection with the disposition of various stock, machinery and tooling.
Please contact me if you have any questions.
By letter dated 25 March 2015 to Mr Lindsay, Mr Lowe stated:
I refer to your letter of today.
Orora does not agree that it is in breach of the Distribution Agreement or that Lindsay has any valid basis upon which to terminate that Agreement.
Lindsay’s conduct in purporting to terminate the Distribution Agreement is in itself repudiatory.
Orora does not accept Lindsay’s repudiation. Accordingly, the Distribution Agreement remains on foot.
Orora requires Lindsay’s written confirmation by no later than 5pm on 26 March 2015 that Lindsay will fully comply with the terms of the Distribution Agreement and that it will not obtain supply of products from third parties other than in accordance with the terms of the Distribution Agreement.
Orora’s rights remain fully reserved.
On 27 March 2015, the applicant filed this proceeding.
The principles
The principles to be applied on injunction applications are well established and were recently summarised by Justice Dixon of this Court in Saraya Nominees Pty Ltd (in its own right and as trustee for the A Saraya Family Trust) v National Australia Bank Ltd[1] as follows:
(a)The plaintiff must demonstrate a prima facie case. This requirement is to be understood as to whether there is a serious question to be tried as to the plaintiff’s entitlement to relief, not whether it is more probable than not that the plaintiff will succeed at trial. The sense in which the test is understood is that the plaintiff must prove prima facie a sufficient likelihood of success to justify in the circumstances preservation of the status quo pending trial. In context, it must show that it has a putative legal or equitable right in respect of which final relief is sought which will justify the restraint sought. The requisite strength of the probability of ultimate success depends on the nature of the rights asserted and the practical consequences likely to flow from the interlocutory orders sought.
(b)The injury which the plaintiff is likely to suffer must be one for which damages will not provide an adequate remedy.
(c)The balance of convenience must favour the granting of an injunction. The balance of convenience requires a consideration of the relevant matters favouring or militating against the granting of an injunction and will necessarily involve a consideration of the strength of the plaintiff’s claim, assuming that a serious issue has been identified. In Victoria, this consideration is further clarified by the decision of the Court of Appeal in Bradto Pty Ltd v Victoria.The court must, in determining whether to grant an interlocutory injunction ‘take whichever recourse appears to carry the lower risk of injustice if it should turn out to have been wrong in the sense of granting an injunction to a party who fails to establish his right at the trial or in failing to grant an injunction to a party who succeeds at the trial’.[2]
[1][2014] VSC 524.
[2]Ibid [28] (citation omitted).
If these elements are satisfied there remains a residual discretion in the court, which may be affected by issues such as delay and the like. In the present case, the injunction sought by the applicant is to restrain a party from acting on a purported termination of a distribution agreement, which is in the nature of a mandatory injunction.[3]
[3]Bradto Pty Ltd v State Of Victoria (2006) 15 VR 65, 70 [22] (Maxwell P and Charles JA).
The Court of Appeal in Bradto v the State of Victoria[4] considered whether a different standard should be applied in applications for mandatory injunctions in contrast to applications for prohibitory injunctions. The Court concluded:
[4]Ibid.
[33] In our view it is desirable that a single test be applied in all cases where an interlocutory injunction is sought. There is nothing in the body of authority to which we have referred, nor any consideration of principle which requires a special test to be applied to one subcategory of such injunction applications, namely, those where mandatory relief is sought. On the contrary, as pointed out convincingly by Hoffmann J in Films Rover, the grant of a mandatory interlocutory injunction may be justified in a particular case notwithstanding that the court does not feel the requisite ‘high degree of assurance’.
[34] As Lord Woolf MR said in Broadmoor Special Health Authority v Robinson, adopting the words of Lord Cooke in TV3 Network Ltd v Eveready New Zealand Ltd:
‘[T]he remedy of injunction should be available whenever required by justice’.
[35] In our view, the flexibility and adaptability of the remedy of injunction as in instrument of justice will be best served by the adoption of the Hoffman approach. That is, whether the relief sought is prohibitory or mandatory, the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been ‘wrong’, in the sense of granting an injunction to a party who fails to establish his right at the trial, or in failing to grant an injunction to a party who succeeds at trial. [5]
[5]Ibid 73 [33]-[35] (citations omitted).
The preparedness of the Court to grant injunctions to restrain a party from terminating a service agreement in the appropriate circumstances is also well established.[6]
[6]Axxess Australia Pty Ltd v Primus Telecommunications (Aust) Pty Ltd[2000] VSC 64 (Warren J); Imac Security Services Pty Ltd v Tyco Australia Pty Ltd[2002] VSC 592 (Redlich J).
Serious question to be tried
The applicant submitted that cl 10.3 of the 2009 Distribution Agreement did not prevent the applicant from supplying product to Simpson Farms because in the subclause the applicant and the respondent only agreed that, after expiry of a Growers Contract, the grower would be supplied with product in accordance with the terms of the 2009 Distribution Agreement.
Counsel for the applicant, Mr Horgan QC, contended that the 2007 Simpson Farms Growers Supply Agreement did not fall within the definition of a Growers Contract because:
(a)as defined ‘Growers Contracts’ means ‘contracts between Amcor, the Rural Companies and the Growers entered into pursuant to the terms of the Old Agreement [being the 2002 Distribution Agreement]’; and
(b)it was the respondent, and not any of the Rural Companies (as defined), which was a party to the 2007 Simpson Farms Growers Supply Agreement.
Counsel for the applicant also submitted that the same result was reached in light of the fact that the 2010 Simpson Farms Growers Supply Agreement was not a Growers Contract as defined. While it may be that the 2010 Simpson Farms Growers Supply Agreement was not a Growers Contract as defined, I do not accept that would have had any effect on the application of cl 10.3 if the 2007 Simpson Farms Growers Supply Agreement was a Growers Contract.
However, I do consider that it is arguable that, on a plain reading of the 2009 Distribution Agreement, the 2007 Simpson Farms Growers Supply Agreement was not a Grower Contract as defined and, therefore, on and from its expiration on 30 September 2009, cl 10.3 did not require that all supply of product to Simpson Farms be made in accordance with the terms of the 2009 Distribution Agreement.
Further, it was contended by counsel for the applicant that even if the applicant did breach cl 10.3 by supplying directly to Simpson Farms, such a breach would not entitle the respondent to treat the breach as a repudiation; or otherwise, as a sufficiently serious breach as to justify termination of the 2009 Distribution Agreement. In particular, the applicant relies upon the fact that Simpson Farms was only one of the growers supplied under with the 2009 Distribution Agreement.
Further, counsel for the applicant submitted that a bona fide dispute does not necessarily give rise to a right to terminate even for the party ultimately found to be the wrongdoer, particularly when that party confirms, in this case in correspondence, its intention to comply with the contract.
On the other hand, counsel for the respondent, Mr Fraser QC, contended that by reference to the surrounding circumstances, and particularly the relevant distribution agreements and the growers supply agreements, a proper interpretation of the 2009 Distribution Agreement is that cl 10.3 was intended to apply to the supply of product to Simpson Farms after the expiration of the 2007 Growers Supply Agreement.
Counsel for the respondent also contended that the commercial purpose of the contract supported an interpretation that the 2009 Distribution Agreement did not permit the applicant to supply to growers whom the respondent had supplied under the 2009 Distribution Agreement. Counsel for the respondent further submitted that the respondent would be entitled to rely on all of the applicant's conduct in the period leading up to the termination to support its contention that the applicant had demonstrated an intention not to be bound by the contract; and relied on statements in correspondence and some evidence of approaches to other growers.
It is suffice to say at this point that I am satisfied that there are serious questions to be tried and that each party has arguments of substance that warrant proper consideration at trial.
Damages as an adequate remedy
The applicant submitted that if it ultimately succeeded, damages would not be an adequate remedy for the following reasons:
(a)The change to the status quo would result in the growers being transitioned across to the product of the applicant’s competitor (Visy) and it is unlikely such growers would revert to the applicant for supply. In particular, the applicant submits that the effect of the respondent's termination is that the growers would be transitioned potentially without their consent and before the applicant has prepared itself to compete.
(b)The damages for the loss of the benefit for the balance of the period of the 2009 Distribution Agreement may be readily calculable, but the effect of the premature transition to the applicant's competitor would be very difficult to assess.
The respondent submitted that if it ultimately succeeded, the applicant's undertaking as to damages would not be an adequate remedy for the following reasons:
(a)If the injunction is granted the applicant would not be restrained from approaching growers and competing with the respondent.
(b)It would be very difficult for the respondent to establish the extent of its damages consequent on the applicant being able to prepare itself to compete with the respondent during the period of the injunction.
Effectively, the respondent’s submissions were the reverse of the coin as submitted by the applicant.
Balance of convenience
The applicant submitted that the balance of convenience favoured the grant of an injunction for the following reasons:
(a) The applicant seeks to preserve the status quo.
(b)The evidence indicates that the respondent has stockpiled product and, accordingly, if the arbitration could be fast tracked there would be little or no detriment in the respondent's transition to Visy being delayed.
(c)The evidence did not substantiate the respondent's submissions that relations between the parties made the continuance of the contract unworkable and, in any event, compliance with the 2009 Distribution Agreement in substance only required the respondent to buy his product for on sale to growers.
The respondent submitted that the balance of convenience favoured the refusal of an injunction for the following reasons:
(a)There was significant disharmony between the parties and the 2009 Distribution Agreement requires significant cooperation between the parties. Therefore, further disputes were inevitable and an injunction would require the courts to undertake a supervisory role.
(b)An injunction would require the respondent to maintain its processes while the applicant prepared to compete with it by offering employment to its team managers, removal of carton, erecting equipment, et cetera.
(c)The applicant was a substantially bigger company than the respondent and it should be inferred that the business of the growers was more significant to the respondent.
In fact, it was submitted on behalf of each party that the growers were in truth its company's customers respectively and the custom derived from the growers represented a significant source of income for its company.
Conclusion
The strength of arguments and the relative convenience of the parties are finely balanced. The weighing has been made more difficult by the fact that the evidence of both parties with respect to the balance of convenience has substantially consisted of assertion and counter- assertion. I make no criticism of the parties for this because the application has properly been brought on urgently and the lawyers have had to prepare the material in support of their respective clients' cases on very short notice.
Significantly, the parties have agreed that the dispute can be dealt with by the Court. I consider that the dispute involves, in substance, the construction of the 2009 Distribution Agreement and the issue of whether the respondent was entitled to terminate the 2009 Distribution Agreement. The Court will be able to deal with these matters as soon as the parties are prepared. In particular, in an attempt to minimise any detriment to the respondent which may be caused by an injunction, the Court will endeavour to list the trial, at least on the question of liability, as soon as the respondent is ready to proceed. If the trial of the proceeding was to be delayed, I would be prepared to reconsider the injunction.
Further, I am influenced by the fact that the parties have been prepared to give additional undertakings to the Court in substance as follows:
(a)Each party is prepared to undertake to expedite the hearing and final determination of the matter; and
(b)The applicant is prepared to undertake not to approach growers supplied under the 2009 Distribution Agreement, including Simpson Farms, except to the extent of extant orders.
In the circumstances, I consider the path that represents the lower risk of injustice is to grant an injunction restraining the respondent from acting on its purported termination of the 2009 Distribution Agreement until further order. The reasons why I will make this order are as follows:
(a)As noted above, I consider there is a serious question to be tried in respect of which each party is likely to have a strongly arguable case.
(b)The trial, as the issues currently stand, at least with respect to the entitlement of the respondent to terminate the 2009 Distribution Agreement, should be able to be dealt with on an expedited basis within approximately two months.
(c)If the respondent was entitled to terminate the 2009 Distribution Agreement, a delay of approximately two months should not cause it significant detriment.
(d)If the applicant is entitled to resist termination of the 2009 Distribution Agreement, it will have an opportunity to establish such entitlement at the expedited hearing without suffering the detriment consequent on change of the status quo.
The fact that I have made the period of the order until further order is solely because this Court will now be seized of the dispute by the consent of the parties. I am very conscious of the potential detriment that might be caused to the respondent by reason of it being so restrained and, therefore, consider it a realistic prospect, if so convinced that this matter cannot be determined on an expedited basis, that the injunction could be discharged prior to final determination.
For this reason I have indicated to the respondent that any request from it for an expedited timetable and for an urgent trial date will be favourably considered. As indicated in the course of argument, I am not prepared to make the orders the applicant has sought for discovery because, on the basis of counsel for the respondent's assurance, it does not appear that there are any subsisting growers contracts as defined by the 2009 Distribution Agreement, and I do not consider that such discovery orders would be justified on an urgent or interim basis.
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