Raine & Horne Pty Limited v Adacol Pty Limited

[2006] NSWSC 36

CITATION:	Raine & Horne Pty Limited v Adacol Pty Limited & Ors [2006] NSWSC 36 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	12/01/2006
JURISDICTION:	EQUITY DIVISION
JUDGMENT OF:	McDougall J
EX TEMPORE JUDGMENT DATE:	01/12/2006
DECISION:	See paras 65-67.
CATCHWORDS:	RESTRAINT OF TRADE - Application for interlocutory injunctive relief - where plaintiff terminates franchise agreement consequent on defendants' breach - where decision to grant injunction will determine substance of the matter - serious question - brass plate restraint - whether restraint void on public policy grounds - whether restraints no wider than necessary to protect legitimate identified interests of franchise - whether damages are an adequate remedy - balance of convenience.
LEGISLATION CITED:	Restraints of Trade Act 1976
CASES CITED:	Attorney General of Australia v Adelaide Steamship Company [1913] AC 781, 797 Brown & Krippner Pty Limited v Hanlon (17 February 1995, unreported; BC 9504286) Curro v Beyond Productions Pty Limited (1993) 30 NSWLR 337 Dawnay Day & Co Ltd v De Braconier D'Alphen [1998] ICR 1068 Hartleys Ltd v Martin [2002] VSC 301 Hitech Contracting Limited v Lynn (5 June 2001 unreported; BC 200108978) Lindner v Murdoch's Garage (1950) 83 CLR 628 North Western Salt Co Ltd v Electrolytic Alkali Co Ltd [1914] AC 461, 470 KA & C Smith Pty Limited v Ward (1998) 45 NSWLR 702
PARTIES:	Raine & Horne Pty Limited Plaintiff Adacol Pty Limited First defendant Mr Colin Shade Second defendant Mr Adam Wylie Third defendant
FILE NUMBER(S):	SC 1018/2006
COUNSEL:	Mr B W Collins QC with Mr C N Bova Plaintiff Mr R Weaver with Ms J Single Defendants
SOLICITORS:	Aitken McLachlan Thorpe Plaintiff Huntington Karras Defendants

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

McDOUGALL J

THURSDAY 12 JANUARY 2006 Ex tempore (Revised 13 January 2006)

1018/06 RAINE AND HORNE PTY LIMITED v ADACOL PTY LIMITED & ORS

JUDGMENT

1 HIS HONOUR:

Introduction
Until shortly before Christmas 2005, the defendants, through the first defendant (Adacol) conducted the business of a real estate agent as Raine and Horne Brighton and Raine and Horne Ramsgate Beach from premises in those respective suburbs. This was done pursuant to franchise agreements made between the plaintiff (Raine and Horne) and the defendants on 4 August 2005.

2 The second defendant (Mr Shade) had conducted the Raine and Horne Brighton business, through another company, since about 1982 (for most of that time, from different premises). Mr Shade and the third defendant (Mr Wylie) and another person had conducted the Raine and Horne Ramsgate Beach business since about 2002.

3 The franchise agreement of 4 August 2005 (for convenience, I use the singular) was said by Mr Shade to have replaced an earlier, unexpired agreement. It is unnecessary to consider the circumstances in which that happened except to note that Mr Shade gave some vague, and in my view unconvincing, evidence of having felt under some pressure to re-negotiate the then current arrangements. The unconvincing nature of that evidence is indicated (for example) by three forms of certificate attached to the franchise agreement of 4 August 2005 whereby Adacol acknowledged having received independent business, accounting and financial advice about the proposed franchise agreement or franchised business.

4 Be that as it may, the term of the franchise agreement ran to 3 August 2007, with an option to extend for a further five years.

5 It is common ground that the franchise agreement has been terminated. Raine and Horne says that that occurred because of breach on the part of Adacol; and the defendants did not (nor, as the evidence stands, could they) submit otherwise.

6 Raine and Horne claims interlocutory relief enforcing certain of the provisions of the franchise agreement that govern what is to happen on termination. It sought in particular to enforce clauses 28.5(c) and 29.1. Those clauses read as follows:

“28.5(c) the Franchisee shall transfer the telephone and facsimile numbers currently being used by the Franchisee in the course of the Franchised Business to the Company or its nominee and shall, if the Company so directs, instruct the relevant service provider to redirect any calls from the telephone number that is currently in use by the Franchisee in the course of the Franchised Business to any telephone number that the Company may nominate.”
“29.1 The Franchisee and the persons named in item 10 of the Schedule as is witnessed by their execution of and the delivery of this Deed agree that they will not for a period of 12 months after the termination (for whatever reason) of this Deed conduct or be in any way employed or interested in any real estate agency business which carries on business substantially within a radius of five kilometres from the Premises.”

Circumstances of termination

7 As I have said, the connection between at least Mr Shade and Raine and Horne, in relation to the business of Raine and Horne Brighton, was of some 20 years standing. Mr Shade said that, prior to 4 August 2005, he had become discontented with a number of aspects of the operation of the franchised businesses (including, specifically, that the defendants - as I shall call them inaccurately but for convenience - had been required to open, and pay franchise fees in respect of, the separate business at Ramsgate Beach when, in their view, it could and should have been conducted in effect as an annex of the Brighton business). Mr Shade said that he had sought to discuss his concerns with representatives of Raine and Horne, but that he could get no satisfaction.

8 It is apparent that representatives of a company in the Ray White Group had approached Mr Shade, or Messrs Shade and Wylie, in late 2004. The nature of that approach has not been revealed, but Mr Shade says that in about February or March 2005, the defendants were asked to become a Ray White franchisee.

9 I interpolate that, on the evidence, there are a number of chains of franchised real estate businesses throughout Australia. On the evidence, the Ray White franchise is one of the largest; and two other large franchised chains are Raine and Horne and the Hooker chain. It is apparent that competition in the real estate business is intense (no doubt in the current state of the property market, it may have become more intense) and that there may be pressure on franchisees to switch from one chain to another. However, at least up until the defendants purported to convert themselves into a Ray White franchise in December 2005, there has never been a Ray White franchise in Brighton or Ramsgate Beach.

10 Mr Shade did not succumb to the initial blandishments of Ray White. Instead, as I have noted, the defendants entered into the replacement or revised franchise agreement with Raine and Horne on 4 August 2005.

11 Mr Shade says that it was in October 2005 - two months after signing the current franchise agreement - that he gave genuine consideration to entering into the Ray White franchise agreement. Shortly thereafter, the defendants did so. It is apparent that Ray White must have been aware of the state of affairs between the plaintiff and the defendants, because it granted the defendants a full waiver of franchise fees until August 2007, when the Raine and Horne franchise agreement would expire. This was done explicitly to enable the defendants to continue to meet their obligations to pay franchise fees to Raine and Horne.

12 For reasons that have not been explained, the precise date of the making of the Ray White franchise agreement, and the terms thereof, have not been put in evidence although the defendants have filed evidence in answer to the plaintiff's claim. The precise date of the switch is therefore a matter of inference.

13 On 6 December 2005, a local newspaper carried a photograph of Mr Shade and Mr Wylie and their staff wearing Ray White uniforms or livery. Raine and Horne became aware of this, and made inquiries. On the evidence of Ms Deland of Raine and Horne, Mr Wylie told her that "It must have been a mistake." Although Mr Wylie has sworn an affidavit, he has not responded to, or denied, that statement; but I was informed from the Bar table that, nonetheless, it is a matter in dispute.

14 A week later, Ms Deland went to Adacol's office and spoke to Mr Shade. They discussed the photograph to which I have referred. Ms Deland says that Mr Shade said "We had some professional photographs taken and those were the ties and scarves that the photographer had in his studio at the time". That somewhat surprising excuse has not been denied by Mr Shade although he, too, has sworn an affidavit. Again, I was informed from the Bar table, it is to be disputed.

15 On 19 December 2005, the defendants informed Ms Deland that they were leaving the Raine and Horne franchise.

16 On 20 December 2005, the defendants informed representatives of Raine and Horne that they had already joined Ray White but that they would continue to pay the Raine and Horne franchise fees in full. They were asked to reconsider their position, with an offer to renegotiate the franchise agreement, but refused.

17 Ms Deland says that at about this time Mr Shade admitted to lying to her in relation to what I have referred to as the somewhat surprising excuse as to the photographs. Again, although Mr Shade has not denied that in his affidavit, I was informed from the Bar table that it will be disputed.

18 On about 21 December 2005, the office of Raine and Horne Brighton was repainted, or redecorated, in the Ray White get-up; and the same thing happened to Raine and Horne Ramsgate Beach shortly afterwards.

19 On 22 December 2005, Mr Shade told Mr Angus Raine of Raine and Horne that the defendants would not comply with clauses 28.5(c) or 29.1 of the franchise agreement.

20 On 23 December 2005, the defendants wrote to all landlords and tenants, vendors who had listed properties for sale with them and other persons whose details were captured on the database of the two agencies, advising those persons of the change from Raine and Horne to Ray White.

21 On 6 January 2005, Raine and Horne wrote to the defendants formally terminating the franchise agreements.

22 Clause 28.1(c) of the franchise agreement entitled Raine and Horne to terminate it if Adacol "voluntarily abandons the franchised business or the franchise relationship". In the circumstances to which I have referred, that power was enlivened. Thus, Raine and Horne was justified in giving notice terminating the franchise agreement, and (as is not disputed) the notice that it gave on 6 January 2006 was effective to do that.

The issues

23 The parties addressed the three issues that arise for consideration when interlocutory injunctive relief (or its equivalent) is sought: the existence of a serious question to be tried; the adequacy of damages as a remedy; and the balance of convenience.

24 The defendants did not rely on other discretionary issues or defences such as (by way of example) delay.

The Court's approach

25 The way in which the Court approaches the question, whether to grant or refuse interlocutory relief, was described by McLelland J in Kolback Security Ltd v Epoch Mining NL (1987) 8 NSWLR 533, 535-536. Neither party submitted that I should take any other approach. McLelland J stated the approach so clearly that I can do no better than quote his Honour's words (omitting the citations):

“… Where a plaintiff’s entitlement to ultimate relief is uncertain, the Court, in deciding to grant or refuse an interlocutory injunction, must consider what course is best calculated to achieve justice between the parties in the circumstances of the particular case, pending the resolution of the uncertainty, bearing in mind the consequences to the defendant of the grant of an injunction in support of relief to which the plaintiff may ultimately be held not to be entitled, and the consequences to the plaintiff of the refusal of an injunction in support of relief to which the plaintiff may ultimately be held to be entitled:… Where the uncertainty depends in whole or in part on a contested question of fact it is not appropriate for the Court to decide that question on the interlocutory application. Where the uncertainty depends in whole or in part on a contested question of law, it may or may not be appropriate for the Court to decide that question on the interlocutory application, depending on circumstances, eg, whether the question is novel or difficult, or is susceptible of resolution on the present state of the evidence, or whether the urgency of the matter renders it impracticable to give proper consideration to the question:…
Unless the plaintiff shows that there is at least a serious question to be tried which if resolved in its favour would entitle it to final relief, then the requirements of justice as between the parties will dictate that an interlocutory injunction should be refused:…
Apart from this, although normally the Court “does not undertake a preliminary trial, and give or withhold interlocutory relief upon a forecast as to the ultimate result of the case”…, there are some kinds of case in which for the purpose of seeing where lies the balance of convenience (or more specifically “the balance of the risk of doing an injustice”…it is desirable for the Court to evaluate the strength of the plaintiff’s case for final relief:…One class of case to which this applies is where the decision to grant or refuse an interlocutory injunction will in a practical sense determine the substance of the matter in issue:…”

Serious question to be tried

26 The franchise agreement has been terminated. The defendants did not submit that they had not, by their conduct, breached it; or that Raine and Horne was not entitled to act as it did; or that the notice of termination was ineffective. It is therefore clear that, prima facie, Raine and Horne is entitled to enforce the consequences of termination.

27 The defendants did submit that there was a serious question to be tried as to the validity of clause 29.1 (although they made no equivalent submission in relation to clause 28.5(c)). I therefore turn to the enforceability of clause 29.1.

Clause 29.1

28 The primary position is that a restraint of trade is void. That applies not just to the classical restraint of trade purporting to prevent a person from working for a particular employer, but also to a restraint of the kind presently sought to be enforced. That is because of the public interest in competition. It follows that a person seeking to enforce a restraint of trade must show that the restraint is no wider than is reasonably necessary to protect its legitimate interests. The test immediately directs attention to the nature of the interest that is sought to be protected. This issue was considered by Gillard J in Hartleys Ltd v Martin [2002] VSC 301. At [91] his Honour stated (in my respectful opinion correctly) that:

“It is well recognised that an employer is entitled to impose a restrictive covenant to reasonably protect his business against ex-employees taking customers with them to a business in competition with their former employer.”

29 For the defendants, Mr Weaver of counsel who appeared with Ms Single of counsel, submitted that there was some distinction to be drawn between restraints of trade in the employment context and the same in the franchise context. I shall return to that question.

30 Gillard J discussed the decision of the High Court in Lindner v Murdoch's Garage (1950) 83 CLR 628. In that case, Latham CJ (who dissented, but whose statement of principle was endorsed by Webb J at 647) said at 634:

“...the covenant in restraint of trade is not a covenant against mere competition but is a covenant directed to securing a reasonable protection of the business interest of the employer, and in the circumstances is not unjust to the employee. The interest which can validly be protected is the trade connection, the goodwill of the business of the employer.”

31 In the same case, Fullagar J at 649 focused on the need to characterise the interest that the employer claimed to have and claimed legitimately to protect. Kitto J at 654 characterised that interest as being:

“Protection for their business connection against the possibility of its being affected by the personal knowledge of and influence over the customers which the appellant might acquire in their employment."

32 The adaption of those principles to the franchise context requires some care. That is particularly so in this case where, for reasons that I shall discuss, Raine and Horne does not seek to prevent the defendants from carrying on their business at all, and in particular does not seek to prevent the defendants from carrying on that business with people who are, or have been, customers of it at either the Brighton or the Ramsgate Beach offices.

33 I think that the correct way to approach the question is to say that restraints of trade may be valid where they are reasonably necessary to protect some identified legitimate interest of the party seeking to enforce the restraint, and where they do no more than is reasonably necessary to achieve that. In New South Wales, that question is addressed, to some extent, by the Restraints of Trade Act 1976 (which provides for the reading down of unduly wide restraints where there is some legitimate interest worthy of protection) but neither party addressed me on the operation of that Act in the context of this application.

34 There are three other matters to note. The first is that the onus for showing that a contract in restraint of trade is reasonable between the parties lies on the party alleging that this is so: North Western Salt Co Ltd v Electrolytic Alkali Co Ltd [1914] AC 461, 470 (Viscount Haldane LC). The second is that the onus of showing that a contract in restraint of trade is injurious to the public interest likewise lies on the party alleging that this is so: Attorney General of Australia v Adelaide Steamship Company [1913] AC 781, 797. The third is that the question of the validity of a covenant in restraint of trade is not really a question of law. The relevant principles are well known. The application of those principles depends on the terms of the particular covenant and the factual circumstances of the particular case: See Dawnay Day & Co Ltd v DeBraconier D'Alphen [1998] ICR 1068 at 1111-1112 (Evans LJ with whom Nourse and Ward LJJ agreed).

The characterization of clause 29.1.

35 Mr Collins QC, who appeared with Mr Bova of counsel for Raine & Horne, submitted that clause 29.1 was a "brass plate" clause: Lu v Lim (1993) 30 NSWLR 332 at 334. In that case, Young J described such a covenant as one which prevented the restrained party from establishing a new business within the area, not one preventing the restrained party from carrying on its business at all.

36 Mr Collins submitted that clause 29.1 operates to prevent the defendants from establishing a competing business within the relevant temporal and geographical constraints, but that it does not restrain them otherwise. Nor, he submitted, does it prevent them from doing in that area acts (whether integral or incidental) to that business so long as the business is carried on outside those temporal and geographical constraints.

37 Mr Collins submitted further that the interest was protected by such a brass plate covenant was that described by Young J in Brown & Krippner Pty Limited v Hanlon (17 February 1995, unreported; BC 9504286). In that case, his Honour said at BC 9504286 at 3:

“As I said in Lu v Lim (1993) 30 NSWLR 332, 334 covenants restricting employees within the professions need to be analysed to see whether they are what are commonly called “brass plate” covenants or whether they are covenants against performing work. By “brass plate” covenants is meant that professional people usually operate out of an office where they put up their plate and advertise to the community that they are available for consultation, but they may from time to time work outside their office. Thus a solicitor will work in a court house, a doctor will make house calls, a surveyor will do field work. Generally speaking, because covenants of this nature are designed to protect the goodwill of the practice, courts tend to look at the covenants as operating in respect of the place where the defendant is using his office to practise. Thus in Lu v Lim, I construed a covenant similar to the covenant in the instant case which forbad a doctor from engaging in a medical practice within a certain area, as permitting a doctor who had his rooms outside the area to make house calls from time to time within the area.”

38 Mr Weaver did not in substance dispute that analysis. In any event, I think, the analysis is correct. In the present case, there are a number of indicia within the franchise agreement that what it creates, and what clause 29.1 seeks to protect, is a business carried on under the franchise banner within a particular locality. There are a number of indications why that is so, including the provisions of the recitals and the definition of Business, and Franchised Business, in clause 1.1.

39 Mr Weaver did submit that clause 29.1 was void on public policy grounds. (I note, and it is important, that he did not submit that the clause was an unreasonable restraint, in time or area, as between the parties; a submission which, if made, would have required consideration of section 4 of the Restraints of Trade Act.) Mr Weaver submitted that members of the public would be significantly disadvantaged if the defendants were prevented from operating their business. In part, this submission proceeded on the basis of what appeared to be a false issue in the evidence (by false, I mean that it addressed an issue that was not raised by Raine & Horne, not that there was some want of probity in the evidence itself). The defendants’ evidence on this issue addressed the circumstances that might arise if they were prevented from operating their business. However, as will be apparent from what I have just said, and as is in any event apparent from the terms of the notice of motion filed on 6 January 2006, Raine & Horne does not seek to do this. It seeks to prevent the defendants from carrying on a business in breach of clause 29.1: ie, from carrying on a business, up until 5 January 2007, within five kilometres of their Brighton or Ramsgate Beach premises.

40 Nonetheless, I proceed on the basis that the submissions addressed the question of disadvantage even upon that more limited (and correct) view of what it is that Raine & Horne is seeking. Unfortunately, because of the apparent misconception on which the defendant's affidavits proceeded, the evidence is slight indeed. Nonetheless, I do accept that if they are required to re-establish their businesses more than five kilometres away from the two present offices, at least some members of the public may find it inconvenient to transact business with them. However, that does not seem to me to go anywhere near raising a public policy issue of the kind that will be necessary to defeat the operation of a restraint of trade provision that, by hypothesis, does no more than is reasonable as between the parties.

41 In this context, I think, the correct principle is explained in Heydon, The Restraint of Trade Doctrine (Butterworths, second edition, 1999) at pages 28 and 166, where it is said that it will only be rarely that a court could find that a restraint of trade, having been found to be reasonable as between the parties to it, would nonetheless be void on public policy grounds.

42 Both because of the lack of attack on the threshold question (reasonableness as between parties) and because of the paucity of evidence on the public policy attack, I think that Raine & Horne has a strong case - or, at least, has made out a serious question to be tried - on the enforceability of clause 29.1.

The interest to be protected.

43 The decision of Austin J in KA & C Smith Pty Limited v Ward (1998) 45 NSWLR 702 makes it clear that a franchisor may have a legitimate interest in the franchise business capable of being protected by a not excessive restraint of trade. His Honour identified that interest (and the competing interest of the franchisee) at 722 as follows:

"3.3 Reasonableness of the restraint:
To assess the reasonableness of the restraint clause, it is necessary to identify the legitimate interests which the clause seeks to protect. This is not a case where the purchaser of a business seeks to protect the goodwill which it has acquired by restraining the vendor from competing; nor is it a case where an employer seeks to protect its confidential information by restraining a former employee from working for a competitor. A franchise agreement has some of the elements of both of these cases, although it is a commercial arrangement closer to the former than the latter: Prontaprint Plc v London Litho Ltd [1987] FSR 315 at 324; Stokely-Van Camp Inc v New Generation Beverages Pty Ltd (1998) 44 NSWLR 607 at 613. In my opinion, the franchisor has an interest at stake which is analogous to the purchaser’s goodwill. It has an interest in protecting the patronage built up through the operation of the franchise, which may be lost if the franchisee is permitted to compete without restriction. The franchisor also has an interest in preserving the confidentiality of confidential information provided to the franchisee, which could be used by the franchisee to compete with the franchisor if there were no restraint. However, the franchisee has an interest in protecting the goodwill of its business. The customers are customers of the franchisee’s business, though the franchisor also has an “interest” in the customers since they are attracted to the business as a franchise business. The question is whether the restraint clause in the second franchise agreement is too wide, given the nature of the franchisor’s interest and the need to balance the interests of franchisor and franchisee.

44 In the present case, I think, Raine & Horne has shown that it does have a legitimate interest to be protected by a restraint of trade clause (or, more accurately, that there is a serious question to be tried as to the existence of such an interest).

45 Firstly, there is its direct interest in receiving franchise fees under the franchise agreement. The defendants have said that they will continue to pay those fees (indeed, as I have noted, their arrangements with Ray White have been structured to allow them to do this). In any event, if that were the extent of the interest, it would clearly be an interest in respect of which damages would be an adequate remedy.

46 Secondly, however, Raine & Horne has an interest in the franchise itself over and above the revenue that it derives from it. For example, if the franchise comes to an end by effluxion of time, it is open to Raine & Horne to enter into a new franchise agreement with another franchisee to establish what would be in substance a takeover of the existing Raine & Horne Brighton, or Raine & Horne Ramsgate Beach, business. By reason of clause 29.1, that would be a franchise effectively taking over from an existing franchise without competition from the former franchisees. That is something quite significantly different to building up a new franchise business in the teeth of competition from the existing franchisees in the very location.

47 Further, as the franchise agreement itself makes clear, the interest of the defendants under the franchise agreement may be assigned or transferred on certain conditions (see clause 12). Again, if that happens, what will be achieved is a smooth transfer of an existing business unencumbered by competition from the former franchisees.

48 Thirdly, and in short, I think that Raine & Horne has significant goodwill in an existing business built up over many years. Indeed, the defendants did not contest this although there was some question as to the extent of that goodwill and as to the extent to which Messrs Shade and Wylie had contributed to it. Although the latter point may be appreciated, it is one that, on the terms of the franchise agreement, is of no legal relevance.

49 Those interests, which seem to me to equate with the interests described by Austin J in KA & C Smith, are clearly interests that may legitimately be protected by a restraint of trade clause that is no wider than reasonably necessary for that purpose.

Adequacy of damages.

50 As I have said, if the interest were limited to receipt of the franchise fees, damages would be an adequate remedy. Many of the submissions for the defendants appeared to proceed on the basis that this was the extent of the problem. But, for the reasons that I have sought to explain, it is not.

51 I accept that there is some difference in the evidence between the approach of Raine & Horne on the one hand and that of the defendants on the other. Perhaps not surprisingly, those approaches follow the differing interests that each, readily enough, may be seen to have. However, proceeding on the basis that neither party has sought to understate the nature of the relevant interest, it seems to me that it would be almost impossible to quantify the loss to Raine & Horne should the defendants be permitted to carry on in their existing premises as Ray White. Certainly, there was evidence, which for the purposes of this application I would accept, that there are suitable office premises available in the relevant suburban or business centres, from which Raine & Horne could set up new franchises. However, I think, there is a fundamental difference between setting up a new franchise in the teeth of competition from the former franchisees, and making arrangements for the orderly continuation, in new hands, of a long-standing franchised business. In that context, it matters not that the goodwill of the franchised business may have been built up in some measure through the efforts of the previous franchisee if (as is the case under the franchise agreement in suit in this case) that is what the former franchisee covenanted to hand over.

52 I do not think that it would be feasible to quantify, in any way remotely likely to capture the real loss, the damages that Raine & Horne would sustain if the restraint of trade clause were not enforced.

Balance of convenience.

53 It is I think legitimate to take into account in this context the strength of the case that the party claiming relief makes. In the present case, as I have said, it is clear that the franchise agreement has come to an end so that, prima facie, Raine & Horne is entitled to enforce the consequences of termination. It is also clear, I think, that Raine & Horne has a strong case for the enforceability of clause 29.1. Those considerations suggest that the balance of convenience lies its way.

54 There is another matter to be borne in mind in this context. The evidence demonstrates that the defendants (again, it is not necessary to distinguish between them) have committed what could be described as a flagrant and opportunistic breach of contract. They seek to provide some justification in their evidence for their actions. They refer, as I have said, to some difficulties or disagreements they have had with Raine & Horne, and to what they perceived as their lack of success in negotiating around those difficulties. However, in circumstances where the approach to switch horses had been made in February or March 2005, and the defendants had, nonetheless, re-signed the franchise agreement in August 2005, I find it difficult to see how their conduct could be regarded as in any way commercially justifiable. There is certainly no basis, at least on the evidence as it is before me, that it is legally justifiable.

55 The public interest in holding parties to their contractual obligations has been recognized in a number of cases. See Curro v Beyond Productions Pty Limited (1993) 30 NSWLR 337 at 347, and Hitech Contracting Limited v Lynn (5 June 2001 unreported; BC 200108978). In the latter case, Austin J said at para [27] that whilst the principle, that a party should be held to its contract, is not an absolute proposition at least on an interlocutory application, "it is a particularly significant matter to consider in the exercise of the court's discretion". I respectfully agree.

56 The defendants pointed to a number of problems that, they said, would flow if they were prevented from operating. However, again, their evidence on this point appeared to proceed on some misconception as to what it was that Raine & Horne was seeking in this application to achieve. It is clear that the defendants will be able, swiftly and effectively, to notify all those with whom they have dealt or who are recorded on their databases, of any change of office (just as they notified all such people, swiftly and presumably effectively, of the change to Ray White on 20 September 2005).

57 There was some evidence that some people dealing with the defendants as tenants might prefer to go to the offices in person rather than deal over the phone. I accept that this is so. But it hardly seems to me to be a matter to shift the balance of convenience so much that it should disincline me to enforce, even on an interlocutory basis, the relevant provisions.

58 The defendants pointed to the hardship that they, and their staff, would suffer if the businesses were closed down. Again, this appears to proceed on some misconception. There is no evidence to suggest that the businesses will close down if they have to be re-established more than five kilometres away from their present location. I accept that it will be inconvenient to do so. That, however, seems to me to be not so much a function of Raine & Horne’s application but a simple result of the defendants’ breach of contract, in circumstances where they must have appreciated the consequences.

59 The defendants pointed also to the cost that Ray White (by which I mean their current franchisor) would incur in taking down or covering over the existing signage, if on a final hearing it were found that the signage could be re-established. I have to say that I do not regard with particular solicitude the position of a party that, if it did not induce a breach of contract, nonetheless acquiesced in one party to the contract acting in such a way that it knew or must have known would involve that party in a breach of contract.

60 In any event, that cost, and the costs that the defendants would incur in relocating would be captured by Raine & Horne's undertaking as to damages if, on a final hearing, Raine & Horne failed to maintain its entitlement.

Conclusion

61 In my view, Raine & Horne has made out not just a serious question as to its entitlement but a strong case. I do not think that the damages that it is likely to suffer could be adequately reflected in any assessment of damages. I think that the balance of convenience, particularly bearing in mind the strength of the case and the nature of the defendants’ conduct, emphatically favours the grant of injunctive relief.

62 The relief that Raine & Horne seeks is that claimed by prayers 1, 2, 6, 7, 13 and 14 of its notice of motion. Prayers 1 and 2 seek to enforce clause 29.1 for the Ramsgate Beach and Brighton businesses respectively. Clauses 6 and 7 relate to the removal or covering of Ray White insignia et cetera on those business premises. Clause 13 relates to the cancellation of advertising placed in relation to the Ray White name from Ramsgate Beach or Brighton. Clause 14 relates to the telephone services.

63 On the view to which I have come, Raine & Horne's entitlement to the relief claimed in prayers 1, 2, 6, 7 and 14 is clear. In relation to clause 14 (the telephone numbers), I should note that the defendants submitted that it would cause some inconvenience to customers if they rang the numbers that they had and found that they were no longer being connected to the defendants. I accept that this is so. Raine & Horne has offered to meet that situation by the proffering of undertakings to the court as to how such calls and facsimile messages will be answered. I understand that, in substance, the terms of that undertaking are satisfactory although it may be that some negotiation is required as to the detail.

64 I add that, to the extent that transfer of the telephone and facsimile numbers might otherwise cause inconvenience, the defendants’ own evidence was that, at least in relation to sales, mobile telephones (which will not be affected by any order) are the primary means of communication. Further, on this point, there should be little residual confusion once the defendants have notified those with whom they deal or hope to deal of the change of address that will be become necessary by reason of the orders that I propose to make.

65 Although the relief sought by prayer 13 of the notice of motion does not in terms find its origin in any contractual source, I think that it is relief that ought in principle to be granted so as to avoid the possibility of confusion to the public, and so as to prevent the continuance of the holding out of the Brighton and Ramsgate Beach businesses as being Ray White businesses. I add that the defendants made no particular submission in respect of the relief sought by prayer 13.

66 I will, therefore, make orders substantially in accordance with those prayers of the notice of motion to which I have referred. Those orders will of course be conditional upon the plaintiff giving to the court the usual undertakings as to damages, and also (in the case of prayer 14) conditional upon the plaintiff giving an undertaking in a form reasonably acceptable to the defendants in relation to the way in which telephone and facsimile calls should be dealt with.

67 My present view is that costs are to be costs in the proceedings or to be reserved.

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