Robby Gordon Entertainment v CAMS
[2018] VSC 600
•11 October 2018
| IN THE SUPREME COURT OF VICTORIA AT MELBOURNE COMMERCIAL COURT | Not Restricted |
S ECI 2018 1579
| ROBBY GORDON ENTERTAINMENT/SST INC (ARBN 611 263 542) | Plaintiff |
| v | |
| CONFEDERATION OF AUSTRALIAN MOTOR SPORT LTD | Defendant |
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JUDGE: | Digby J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 5 and 10 October 2018 |
DATE OF JUDGMENT: | 11 October 2018 |
CASE MAY BE CITED AS: | Robby Gordon Entertainment v CAMS |
MEDIUM NEUTRAL CITATION: | [2018] VSC 600 |
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PRACTICE AND PROCEDURE – Urgent application – Interlocutory injunction – Suspension of contractual rights – Where plaintiff seeks restoration of contractual rights – Alleged breaches of Competition Management Agreement – Existence of serious issues to be tried – Whether plaintiff can demonstrate a prima facie case – Whether damages are inadequate – Whether balance of convenience favours granting injunction – Effect of injunction on third parties – Weight of reputational impairment – Safety of racing officials and the public.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S Anderson QC with Mr S Grant | Hall & Wilcox |
| For the Defendant | Mr J Gleeson QC with Mr E Batrouney | Maddocks |
HIS HONOUR:
Urgent application
By Summons dated 1 October 2018, the plaintiff applies for an urgent interlocutory injunction requiring the defendant to withdraw a suspension notice delivered to the plaintiff pursuant to cl 12 of the Competition Management Agreement between the plaintiff and the defendant dated 20 February 2018 (CAMS Agreement). The plaintiff’s submissions also seek an order enjoining the defendant from issuing any further suspensions that would prevent the plaintiff from performing contractual obligations at the Vodafone Gold Coast 600 (Gold Coast 600 Event) from 19 to 21 October 2018.[1]
[1]Plaintiff’s Submissions, 4 October 2018, pg. 6.
The injunctive relief sought by the plaintiff should be refused for the reasons below.
Background
The CAMS Australian Stadium Super Truck Series (the Series) involves a number of V8 powered utility vehicles with lifted suspension kits (Super Trucks or SST) racing around a closed circuit.[2] Aluminium ramps are strategically set up at various locations around the circuit.[3] Super Trucks jump over these ramps at speeds causing them to become airborne.[4]
[2]Affidavit of Timothy Schenken, 4 October 2018 (Schenken Affidavit), [4].
[3] Schenken Affidavit, [4].
[4]Affidavit of Scott McGrath, 4 October 2018 (McGrath Affidavit), [9].
Parties to this proceeding
Mr Robert W Gordon is an American race car driver. Robby Gordon Entertainment/SST Inc. (the plaintiff) is incorporated in the United States of America and registered as a foreign corporation in Australia. The plaintiff created ‘SPEED Energy Stadium SUPER Trucks’ in response to what it describes as ‘the public’s overwhelming interest in trucks and off-road racing in the United States’.[5]
[5] Affidavit of Nathan Cayzer, 27 September 2018 (Cayzer Affidavit), [6].
The Confederation of Australian Motor Sport (the defendant or CAMS) has been the governing body of motor sport in Australia since it was established in 1953.[6] The Director of Racing Operations, Mr Timothy Schenken (Schenken), describes CAMS as having two core functions: one facilitating the license and approval of various categories of race taking place in Australia and the other taking responsibility for the provision of facilities at such events with a view to ensuring the safety of all participants, officials, referees and spectators.
[6]Schenken Affidavit, [20].
CAMS is affiliated with the Federation Internationale de l’Automobile (FIA). The FIA is a not-for-profit association founded in 1904 which serves as the governing body for world motor sport. It is the federation of the world’s leading motoring organisations.[7] The FIA is principally concerned with safety in motor sport, including spectators, volunteers, race team members and the competitors themselves.
[7]Schenken Affidavit, [12].
Since about 1960, CAMS has been recognised by the FIA as the National Sporting Association governing motor sport in Australia. Essentially CAMS provides, trains and licences marshals and officials to ensure safety at motor sport events in Australia. While CAMS owns the commercial rights to motor sport in Australia by virtue of its position as a National Sporting Association, in practice it sublicenses those rights to third parties (such as the plaintiff).
The Competition Management Agreement (CAMS Agreement)
On 20 February 2018, the plaintiff and the defendant entered into the CAMS Agreement.[8] In substance, under the CAMS Agreement, the defendant has granted the plaintiff exclusive rights to organise, conduct, promote and market four rounds of the CAMS Australian Stadium Super Truck Series in Australia from 20 February 2018 to 31 December 2018 as the ‘Series Manager’.
[8]Ibid [29].
To date in 2018, the plaintiff has conducted two series of races under the CAMS Agreement.[9] Those events were:
(a) 2018 Adelaide 500 from 1 to 4 March 2018 at Victoria Parklands, Adelaide, South Australia; and
(b) 2018 Perth Super Sprint from 4 to 6 May at Barbagallo Raceway, Perth, Western Australia.
[9]Cayzer Affidavit, [17].
On 10 January 2018, the plaintiff entered an agreement (the Performance Agreement) with V8 Supercars Australia Pty Ltd (V8 Supercars), as trustee for the Avesco Unit Trust, to run a series of races at the ‘Vodafone Gold Coast 600’ from 19 to 21 October 2018 (the Gold Coast 600 Event). Completion of the plaintiff’s obligations under the Performance Agreement is contingent on the rights it has been conferred under the CAMS Agreement.
The incident at Barbagallo (the Nolan Incident)
The plaintiff conducted the series at the 2018 Perth Super Sprint event, held at Barbagallo Raceway, Perth, Western Australia, between 4 and 6 May 2018.[10] In this application, the defendant relies heavily on a particular incident that occurred at that event on 5 May 2018 during the first series race involving SST.
[10]McGrath Affidavit, [9].
On 5 May 2018, vehicle no. 21 driven by Mr Matthew Nolan landed on one wheel after traversing one of the ramps on the main straight at the Perth Barbagallo Raceway.[11] This appeared to cause that vehicle to roll over multiple times on the pit straight. The rear left wheel of the vehicle detached and launched itself into the air. The detached wheel then impacted a pedestrian bridge above the main straight of the circuit at a height of approximately five metres. At about the same time, the centre hub section also broke off from the vehicle, resulting in pieces of the centre hub being propelled over the safety barrier and debris fencing, and landing in an adjacent support paddock pit lane.[12] The height of the debris fencing is three and a half metres.
[11]Schenken Affidavit, [33].
[12]McGrath Affidavit, [12].
As a result of the Nolan Incident, on 5 May 2018 the CEO of the defendant, Mr Eugene Arocca, arranged for a Working Group to determine what action should be taken in response.[13] Mr Scott McGrath (McGrath) deposes that the Working Group convened on 8 May 2018 and resolved to suspend the Series before a full investigation. This was ‘based on a view that the risk of a spectator or official being seriously injured or killed was too great to allow the Series to proceed at that time’.[14] In reaching this decision, Schenken deposes to the Working Group also having regard to a number of previous incidents involving the Series, as detailed below.[15]
[13]Schenken Affidavit, [35].
[14]McGrath Affidavit, [15]-]32].
[15]Schenken Affidavit, [35].
Suspension of the CAMS Agreement
On 8 May 2018, the plaintiff received a letter from Tahli Preston-Dixon (also identified in the materials as Tahli Hackett), General Counsel for the Defendant. Ms Preston-Dixon notified the plaintiff of the defendant’s ‘immediate suspension’ of the plaintiff’s rights under the CAMS Agreement (the Suspension Letter).[16]
[16]Cayzer Affidavit, [19] and Exhibit ‘NAC–C.’
The Suspension Letter informed that the suspension was effected pursuant to cl 12 of the CAMS Agreement. This clause states:
12 Suspension
(a)Where CAMS reasonably considers that there has been, or is likely to be a breach of this Agreement by the Series Manager, CAMS may issue a written notice to the Series Manager which suspends the Series Manager’s rights under this Agreement. Upon issue of such notice and until such time as CAMS notifies the Series Manager that the suspension is lifted or the Agreement is otherwise terminated the Series Manager may not organise or hold any Round of the Series.
(b)Monies payable by the Series Manager will not be reduced or refunded for the period of the suspension unless CAMS subsequently determines that the notice of suspension was issued erroneously, in which case CAMS may agree to refund some or all of those monies referable to the period of the suspension.
(c)CAMS will not be liable for any loss or damage suffered by the Series Manager or to pay it any compensation for any reason as the result of a suspension, unless the Series Manager proves that CAMS was acting in bad faith at the time it issued the notice of suspension and did not have reasonable grounds to issue a notice of suspension.
(d)Where CAMS suspends the Series Manager rights in relation to this Agreement under clause 12(a), the Series Manager must indemnify CAMS in respect of any actual:
(i)any cost or expense suffered by CAMS as a result of the suspension; and
(ii)loss or damage suffered by CAMS as a result of any claim by any third party arising out of the suspension,
unless the Series Manager proves that CAMS was acting in bad faith at the time it issued the notice of suspension and did not have reasonable grounds to issue a notice of suspension.
(e)Any suspension by CAMS under this clause is without prejudice to CAMS’ rights under this Agreement, including its rights to terminate this Agreement.
The Suspension Letter also identified the following bases for the defendant’s decision to suspend the plaintiff’s rights under cl 12(a):
(a) the SST Series poses an unacceptable risk to the health and safety of competitors, officials and the general public, ‘as was particularly evident during the recent Round at Barbagallo Raceway in Western Australia’;
(b) the venues being used are unsuitable for the form of racing that is being undertaken; and
(c) the vehicles themselves are not designed to acceptable safety standards, with the shearing of cast-alloy wheel parts exposed to significant loads being one example of incidents where parts of vehicles can become airborne.
The Suspension Letter claims that the above allegations constitute breaches of cls 4(d)(iii), 5.2(c), 5.3(a)(ii)(A) and (B), and 5.8(a)(ii) and (iv) of the CAMS Agreement.[17] However, the Suspension Letter does not assert why the allegations, if proven, would constitute contraventions of the obligations contained in these clauses.
[17]Cayzer Affidavit, [19] and Exhibit ‘NAC–C’.
The Suspension Letter concludes:
You must not organise or hold any Round of the Series while this suspension remains in place.
You are invited to make a submission to the CAMS Board as to why this suspension is unreasonable and/or the aforementioned breaches are without grounds.
Any such submission should be addressed to myself and must be received on or before 22 May 2018.[18]
[18]Cayzer Affidavit, Exhibit ‘NAC–C’, (emphasis in original).
Plaintiff’s request for more information
The firm Rutan & Tucker, based in Orange County, California, is American counsel to Mr Gordon and the plaintiff. On 11 May 2018, Mr Steven A Nichols from Rutan & Tucker wrote to Ms Preston-Dixon requesting a factual basis for the defendant’s allegations.[19] He foreshadowed the plaintiff’s intention to make a submission in response to the decision to suspend rights under the CAMS Agreement. Ms Preston-Dixon did not respond to this request.
[19]Cayzer Affidavit, Exhibit ‘NAC–D’.
On 21 May 2018, Mr Nichols sent a follow-up email to Ms Preston-Dixon seeking confirmation she received his previous correspondence and to ascertain the defendant’s intentions.[20] Once again, Ms Preston-Dixon did not respond to Mr Nichols. The deadline for the plaintiff’s submission against suspension of the CAMS Agreement lapsed on 22 May 2018.
[20]Cayzer Affidavit, Exhibit ‘NAC–E’.
On 30 May 2018, Ms Preston-Dixon sent an email to Mr Nichols which apologised for the delay seeking to explain that she was ‘on leave’, advised of the defendant’s intention to provide a factual basis for the relevant allegations, and advised that the plaintiff would be provided with an opportunity to respond before the matter was put to the CAMS Board.[21]
[21]Cayzer Affidavit, Exhibit ‘NAC–F’.
On 13 June 2018, Mr Nichols again wrote to Ms Preston-Dixon because the defendant had not provided a factual basis for its allegations. The plaintiff requested the information immediately and ventilated the following concerns:[22]
[22]Cayzer Affidavit, Exhibit ‘NAC–G’.
(a) the defendant was not prepared to consider in good faith any corrective action that could be undertaken by the plaintiff;
(b) the defendant’s conduct could cause the plaintiff to breach agreements with third parties concluded in reliance on the existence of the CAMS Agreement with the defendant; and
(c) the defendant’s conduct could otherwise have far-reaching legal and financial consequences.
The Incident Report
At the behest of the Working Group, McGrath commenced a technical investigation into the Nolan Incident, which he deposes is consistent with the defendant’s ordinary practice,[23] ‘to get a sense of what happened to the wheel and centre hub parties that had detached from Super Truck no. 21’.[24] The resulting report (the Incident Report) is dated 19 June 2018.[25]
[23]McGrath Affidavit, [16].
[24]Ibid [18].
[25]McGrath Affidavit, Exhibit ‘SM–3’.
He summarises the conclusion of this investigation as follows:
Because the Super Trucks have a high centre of gravity, there is an increased risk of a rollover and in circumstances where closed circuit racing often involves spectators and officials being within close proximity of the circuit, the possibility of debris injuring or killing a spectator or official is significantly increased.[26]
[26]McGrath Affidavit, [20].
In summary, his report concluded:
(a) the safety cage structure of the Super Truck had been damaged and would require replacement;
(b) the wheel had sheared through the spoke section of the wheel, causing the outer rim section and tyre to separate from the Super Truck;
(c) the centre wheel section remained in place until the Super Truck impacted the road, causing pieces of it to end up in the pit lane;
(d) Super Trucks are not designed for circuit racing because, among other things they:
(i) are appropriate for use in an off-road environment and competition on loose surfaces (dirt, sand or mud) rather than hard surfaces (tarmac or bitumen);
(ii) have a high centre of gravity when compared to other circuit racing vehicles increasing the likelihood of a rollover; and
(iii) are constructed using methods and standards designed for off-road use.[27]
[27]Schenken Affidavit, [39].
The Incident Report also identified a risk that, in a roll over, the wheels on an SST are susceptible to breaking away at the mounting point to the vehicle.[28] It is now evidenced that this has occurred on multiple occasions, including on the day prior to the Nolan Incident (4 May 2018) and in an incident at the event the previous year (J Kostecki 5 May 2017).[29]
[28]See ‘Risk Outcomes’ McGrath Affidavit, Exhibit ‘SM–3’.
[29]Schenken Affidavit, Exhibit ‘TTS–6’.
Once broken away the wheel and tyre are uncontrollable. There is a risk that the wheel and tyre may, depending on its trajectory, travel into spectator or event operations areas.
In this case, had the wheel and tyre not impacted with the overhead walkway, it is highly likely that it would have continued its trajectory and entered the support paddock pit area.
Further, an additional risk is posed by wheel fragments dislodged in the second roll-over movement, which travelled over the debris fence and into the pit lane area. These fragments, each weighing over 500 grams, pose a significant injury risk to those operating in the area.
It is highly likely that with the current design and operation methods of the SST vehicles that a wheel will again come away from a SST vehicle whilst competing, posing a significant injury risk should it impact upon a person at the event.
It is the opinion of the report writer that the SST vehicles pose a risk when used in the manner and format at Circuit Racing events, whereby they undertake to jump together in a racing environment on a surfaces for which the vehicles are not designed. The Incident Report concludes that it is only a matter of time before another incident of the same type as the Nolan Incident occurs.[30]
[30]Schenken Affidavit, Exhibit ‘TTS–6’.
The basis for suspension elaborated by CAMS
On 3 July 2018, the defendant sought to substantiate its allegations in a letter to the plaintiff. The letter stated that the defendant remained of the view the SST Category of vehicle poses ‘an unacceptable risk to the health and safety of competitors, officials and the general public and that the venues being used … are unsuitable for the form of racing undertaken’.[31] The letter cited eight incidents from Australia since 2015 as evidence of this manifest risk.
[31]Cayzer Affidavit, Exhibit ‘NAC–H’.
The letter also raised the following concerns:[32]
[32]Cayzer Affidavit, Exhibit ‘NAC–H’.
(a) ‘during almost every race there has been an incident of some description which, upon review, has raised serious concerns for the safety of all competitors, officials and the general public’;
(b) ‘driving standards appear to be unacceptable. In the opinion of CAMS the drivers make no significant effort to avoid collisions, decrease speed when involved in an incident and otherwise heed no sense of risk management in the way they drive’;
(c) ‘In some events chicanes made from moveable bollards or plastic barriers are used to reduce the speed when vehicles are approaching jumps. More often than not these are quickly pushed out of the way by vehicles resulting in higher speeds at the jumps. During one incident on the Gold Coast a vehicle jumped to height that completely exceeded the height of the catch fence [sic]’;
(d) ‘Further incidents include post-race burnouts and wrong direction actions, including a report from the recent event at Barbagallo of vehicles from the Category doing stationary burnouts up against the track wall causing dirt and debris to be spread over the track’.
The 3 July 2018 letter reiterates the defendant’s view that the plaintiff has breached cls 4(d)(iii), 5.2(c), 5.3(a)(ii)(A) and (B), and 5.8(a)(ii) and (iv) of the CAMS Agreement.
The plaintiff’s response
In Mr Nichols’ letter dated 11 July 2018, the plaintiff provided its response to the defendant’s concerns. The main points raised in Mr Nichols’ letter included that the defendant:[33]
(a) was aware of seven of the eight listed incidents when it signed and entered into the CAMS Agreement with the plaintiff in February 2018; and
(b) owes the plaintiff an obligation to identify and raise safety concerns in good faith, so that concerns can be addressed in an orderly fashion and without the damage caused by suspension of the CAMS Agreement.
[33]Cayzer Affidavit, Exhibit ‘NAC–I’.
Mr Nichols’ letter also identified the following corrective action that had been or would be undertaken by the plaintiff (the Proposed Corrective Action):[34]
[34]Ibid.
(a) Detached wheels becoming airborne
The plaintiff claims this is a rare occurrence. In any event the plaintiff has modified the wheel fabrication specifications by eliminating cast wheel construction and ensuring all new SST wheels are forged. This means wheels are far more resistant to breaking at the point of connection and fewer if any wheels will become detached from vehicles during races. The plaintiff intends to include this new specification in the rules and procedure book and to update its driver training and certification program.
(b) Detached body work becoming airborne
The plaintiff claims that the only portion of the body work that has become detached in an SST race is the hood, but no hood has never become airborne for a material amount of time and, in any event, the plaintiff is working on a tether system to maintain connection between the hood and the vehicle. Further, the plaintiff notes the rules currently impose a two position penalty, which will soon be increased to a three position penalty, for vehicles that lose hoods during a race.
(c) Excessive number of vehicle rollover events
The plaintiff disagrees with the defendant’s assessment of the number of rollover events in SST racing, but notes that SST representatives have met with CAMS officials to evaluate ramp positions at every race event. In any event, the plaintiff has decided to eliminate double ramp locations in SST race layouts. The plaintiff will also modify its driver training and certification program (including providing for the imposition of penalties for breaches of on-track conduct requirements and more precise guidelines on how to approach and land jumps and minimise contact with other vehicles), and is updating its rules and procedure book accordingly.
(d) Track safety barriers being pushed to locations rendering them ineffective; Driver conduct in failing to avoid collisions; Failing to slow during a collision, and wrong-way actions
On these points, the plaintiff has also decided to update its driver training and certification program; impose a penalty system for breaches of on-track conduct requirements; and impose more precise guidelines on how to approach and land jumps and minimise contact with other vehicles.
Mr Nichols’ letter of 11 July 2018 also pre-emptively responded to allegations that the plaintiff breached cls 4(d)(iii), 5.2(c), 5.3(a)(ii)(A) and (B), and 5.8(a)(ii) and (iv) contained in Ms Preston-Dixon’s letter dated 3 July 2018. The plaintiff stated:
(a) In respect of the alleged cl 4(d)(iii) breaches, the plaintiff is committed to implementing a driver training and certification program using qualified instructors with emphasis on driving standards and expectations of conduct and to implementing a penalty system for breaches of on track conduct.
(b) In respect of the alleged cl 5.2(c) breaches, the plaintiff will produce a revised dedicated rule book, implement a documented chain of command, implement a complaints/inquiries procedure including reviews and sign-off and implement driver training and certification.
(c) In respect of the alleged cl 5.3(a)(ii)(A) and (B) breaches, the plaintiff will develop and implement improved and Australian compliant OH&S policies directly relevant to the category, implement amendment appendixes for event controlling bodies and promotion of OH&S procedures, and develop and implement improved Australian-compliant event based acceptance sign-off sheets for OH&S procedures to be completed by drivers, officials and staff.
(d) In respect of the alleged cl 5.8(a)(ii) and (iv) breaches, the plaintiff will produce a revised dedicated rule book, implement a documented chain of command, implement a complaints/inquiries procedure including reviews and sign-off and implement driver training and certification.
Further, in response to subclause (iv), Mr Nichols states that the plaintiff will develop damage assessment sheets and post event reviews to be complied with stewards reports and implement incident reporting processes and review structures.
Ms Preston-Dixon did not respond to this letter.
On 23 July 2018, Mr Nichols sent a further email to Ms Preston-Dixon which he described as a ‘supplement’ to the previous correspondence concerning the suspension of contractual rights.[35] This email attached video clips and photographs from a ‘V8 Supercars Super UTE event’ depicting various roll-over events, broken wheels and wheels separating, going airborne, and travelling at a high velocity and for a great distance. The email points out that the ratio of roll-overs, failed wheels and airborne parts for V8 Supercars is higher than the same ratio for SST race events. For this reason, the email suggests that the defendant should (or ought to have) ordered the suspension of V8 Supercars’ rights under the relevant CAMS Agreement, in the interests of ‘fairness’, if the same logic is to be applied.
[35]Cayzer Affidavit, Exhibit ‘NAC–K’.
Dispute resolution process
On 24 July 2018, Ms Preston-Dixon wrote to the plaintiff invoking cl 16 of the CAMS Agreement.
Clause 16 of the CAMS Agreement provides:[36]
[36]Cayzer Affidavit, Exhibit ‘NAC–B’.
16 Dispute Resolution
(a)In the event that a party to this Agreement considers that a dispute has arisen in relation to this Agreement, that party shall give notice in writing to the others stating the nature and details of the dispute, and stating the names of the parties who will engage in the dispute resolution procedure on that party’s behalf.
(b)Within 10 Business Days of receipt of such notice, the recipients shall appoint representatives to so engage, and shall notify the names of those parties to the other party.
(c)The appointed representatives shall then within three Business Days agree upon a format and location for open discussion of the subject matter of the dispute, such discussion to take place with 10 Business Days of the service of the notice under clause 16(a) [sic].
(d)The parties shall negotiate in good faith and use their best endeavours to resolve the dispute.
(e)In the event that the discussion process fails to resolve the dispute, the parties shall appoint a mediator or arbitrator acceptable to all parties and upon such procedure to be followed thenceforth instead of litigation.
(f)Should resolution not be reached within 40 calendar days of the service of the notice of dispute under clause 16(a), either party may commence litigation.
(g)The parties agree that all discussions during the non-litigious phase of the dispute resolution between them shall be totally without prejudice, and any documents created for the purpose of assisting that process shall be privileged, and may not be used in any subsequent Court proceedings.
(h)The parties agree that nothing in this clause 16 prevents them from applying to a court of competent jurisdiction for urgent interlocutory relief.
Between 24 and 30 July 2018, there were protracted and unproductive discussions between Rutan & Tucker and the defendant for how best to effect a teleconference.[37]
[37]Cayzer Affidavit, [28]–[35].
The teleconference occurred on 31 July 2018 (AEST). In attendance were Mr Gordon, Mr Nichols and Mr Cayzer (for the plaintiff) and Ms Preston-Dixon, Mr Smith (General Manager of Motor Sport for CAMS), Schenken (Director of Racing Operations OAM for CAMS) and McGrath (Division Manager, Technical for CAMS).[38]
[38]Ibid [36].
By means of an affidavit of Mr Sean Sullivan, Solicitor, sworn 3 October 2018, the plaintiff sought, at the outset of the injunction hearing, to obtain leave to rely on that affidavit and exhibit ‘SAS-A’ which is the transcript of the telephone conference which occurred on 31 July 2018.
I ruled against the plaintiff’s tender of, and reliance upon, the transcript of 31 July 2018. My reasons include that the telephone conference:
(a) had been arranged between the legal representative of the parties in furtherance of the parties’ obligations under cl 16 (Dispute Resolution) of the CAMS Contract, which provides at cl 16(g) that:
The parties agree that all discussions during the non-litigious phase of dispute resolution between them shall be totally without prejudice, and any documents created for the purpose of assisting that process shall be privileged, and may not be used in any subsequent Court proceedings.
(b) both parties’ legal representatives arranged what I consider on the above, and below bases, to be a without prejudice discussion on 31 July 2018;
(c) the transcript of the teleconference on 31 July 2018 records (at the outset) that General Counsel for the plaintiff confirmed that the discussion to follow would be ‘on a without prejudice basis’;
(d) the legal representative for the plaintiff in attendance at the Conference on 31 July 2018, responded to General Counsel for the defendant confirming the without prejudice nature of the discussions to follow, by only seeking to make arrangements to obtain a copy of the recording of the conference. No issue was taken by the plaintiff’s General Counsel with the conference proceeding on a without prejudice basis;
(e) in my view, it would also be most unfair to the defendant if, in the circumstances, the transcript of the without prejudice conference on 31 July 2018 could now be relied on by the plaintiff.
On 1 August 2018, following the teleconference on 31 July 2018, Rutan & Tucker sent an email to General Counsel for the defendant stating:[39]
[39]Cayzer Affidavit, Exhibit ‘NAC–M’.
(a) the plaintiff contends that the defendant is in ‘material breach of contract’ with respect to numerous obligations under the CAMS Agreement, including (but not limited to) obligations to negotiate in good faith and utilise best endeavours to resolve disputes, its obligation not to make any new, or alter any existing safety rules or regulations without the plaintiff’s advance written agreement, its obligation to follow its existing rules and regulations for addressing driver compliance, safety, vehicle certification and race management issues, and other express and implied obligations of good faith and fair dealing;
(b) the defendant had made it ‘absolutely clear’ it had no intention of negotiating or addressing the disputed issues at all, no intention of resolving the dispute in good faith, no intention of responding to the plaintiff’s proposals, and that it has decided to terminate the CAMS Agreement; and
(c) the plaintiff intends to ‘fully enforce all of its contractual and legal rights and claims against CAMS’.
Further evidence of the defendant’s safety concerns
In the subject application, by affidavit materials and in particular the affidavit of McGrath and Schenken, the defendant responds to the plaintiff’s technical assertions, its key assertions and its proposed modifications. McGrath deposes that he reviewed the submission, and formed the views that the plaintiff’s proposals were without adequate specific details. McGrath also notes there was no indication of what ‘testing program’ had been applied to the plaintiff’s proposals and therefore he could not provide an informed opinion on the suitability of the suggested solutions.[40]
[40]McGrath Affidavit, [23].
In his affidavit sworn 4 October 2018, McGrath provided further evidence in support of the defendant’s view that the relevant Series entails unacceptable risks.
McGrath summarises the plaintiff’s evidence that it has adequately addressed the safety risks that arise from SSTs. The plaintiff asserts it has:[41]
[41]Ibid [26].
(a) redesigned the wheels of the Super Trucks such that the wheels are now constructed using a forged method (rather than cast alloy), which SST claims will reduce the likelihood of a wheel failure similar to that which occurred on 6 May 2018 at Barbagallo;
(b) redesigned the anchorage of the hood (i.e. the bonnet) such that it is less likely to come off during racing; and
(c) implemented a more rigorous driver training program.
However, McGrath deposes that there is no evidence from the plaintiff that:[42]
[42]Ibid [27].
(a) the redesigned wheels will reduce or remove the likelihood of a wheel failure;
(b) the redesigned anchorage system of the hood will reduce or remove the risk of the hood and/or pieces of the hood coming off during racing; or
(c) the more rigorous driver training program provided to competitors in the Series.
Wheel failure
McGrath deposes that there are two types of wheel failure:
(a) Type 1 is where the wheel or the wheel retention devised used to attach the wheel to the hub or axel has failed. This can occur where the wheel has fractured; the section of the wheel attached to the hub or axel has become detached (such as through pulling over or through the wheel retention device, namely a nut or bolt); or where the wheel retention device no longer retains the wheel to the hub or axel (such as a nut or bolt failure).[43] In this situation, there is no way to prevent the wheel (or fractured pieces) from travelling its own path based on momentum or trajectory.[44]
(b) Type 2 is where the wheel hub or axel, or associated components attaching the wheel hub or axel to the vehicle, have failed. This can occur where the wheel or axel itself fails; the wheel hub or axel connection fails (such as a bearing failure or stub axel failure); the connection between the wheel hub and chassis fails (such as a suspension control arm of join failure); or the axel retention device or mechanism fails. By contrast to Type 1, a Type 2 failure can be softened by the use of ‘wheel tethers’ limiting the momentum and trajectory of the wheel and associated components. They may even keep the wheel attached to the vehicle. If the wheel tether were to also fail, at the very least, the tether should reduce the momentum of the wheel and restrict the initial trajectory, keeping the wheel and associated components closer to the ground.[45]
[43]McGrath Affidavit, [28]–[29].
[44]Ibid [30].
[45]Ibid [31]–[32].
Super Trucks repeatedly jump and frequently land on one wheel. Considerable pressure is placed on a single wheel in such situations. For this reason, McGrath deposes that his view is Type 1 failures will continue to occur.[46] He cites multiple instances of Type 1 wheel failures over the past two or three years.[47] In addition to the Nolan incident, McGrath notes that there were Type 1 wheel failures at the Clipsal Adelaide event (2016) and the Perth Super Sprint event (2017), with the wheel leaving the vicinity of the vehicle under its own momentum and trajectory on each occasion.[48]
[46]Ibid [34].
[47]Ibid [33].
[48]Ibid [34].
While acknowledging that, on the plaintiff’s proposal, a change in the design and construction of Super Truck wheels could improve the ability of wheels to withstand a greater degree of impact, McGrath deposes that this will not resolve the underlying issue: namely, that Super Trucks continually land on a single wheel. Instead, the change may only transfer the impact to the wheel retention device and cause a failure in that area. The same result will ensue: wheels and related components will continue become detached from the vehicle.[49]
[49] Ibid [34]–[35].
McGrath maintains the plaintiff’s assertion, that wheels designed using a forged method (as opposed to cast alloy) will reduce the likelihood of wheel failure, should be subject to modelling and testing. Without conclusions drawn from such a program it is unclear what benefits changing the design and construction of the wheel will yield.[50]
[50]Ibid [38].
Detached hoods
McGrath maintains that there is an underlying flaw in the current hood panel design and materials, such that the plaintiff’s suggested improvement to the hood retention mechanism is extraneous.[51] In particular, McGrath deposes:
(a) detached hoods are affected by wind and momentum, being variables affecting the hazard that are largely out of the plaintiff’s control;[52] and
(b) the nature of the Super Truck hood material (fibre reinforced polymer) is prone to fracturing, aggravating the possibility that a smaller piece of the hood could become detached.[53]
[51]Ibid [42].
[52]Ibid [39].
[53]Ibid [41]–[42].
SST safety record
Broadly, McGrath deposes that he is aware of a number of safety incidents that have occurred in SST races outside of Australia. In particular, he refers to an incident involving Mr Matthew Mingay, an Australian driver competing in SST’s United States competition in 2016, where the vehicle rolled over and slammed into safety barriers.[54]
[54]Ibid [43].
Further defendant concerns referred to in the Schenken affidavit
In his affidavit sworn 4 October 2018, Schenken also provides evidence of the following additional CAMS safety concerns:
(a) The ‘driving culture’ of competitors is likely to increase the risk of further safety incidents. For example, Schenken claims he has witnessed inappropriate behaviour on several occasions where drivers knock into one another.[55]
[55]Ibid [48].
(b) The ‘driving culture’ is of such a nature that the Super Trucks will often traverse the grass adjacent to the track for large portions of each races. However, the vehicles are not designed for this purpose. Moreover, when the drivers merge back onto the track, the vehicle brings dirt, sand or mud, with it posing a safety hazard for subsequent race events.[56]
(c) Because of these matters, Schenken is concerned that the proposed modifications to the driver training certification programme, rules and procedure book will not be sufficiently implanted or adhered to in time for the event commencing 19 October 2018 to be effected.[57]
(d) There is insufficient time prior to the event commencing 19 October 2018 to undertake sufficient testing to confirm that a new or modified safety barrier or debris fence will withstand impact with a Super Truck.[58]
[56]Schenken Affidavit, [48].
[57]Ibid [49].
[58]Ibid [50].
Schenken also confirms the following.
(a) He firmly agrees with the CAMS Working Group decision that the response matters put forward by the plaintiff, and in particular the plaintiff’s proposed modifications and solutions did not satisfactorily address CAMS safety concerns.[59]
[59]Ibid [36] and [41].
(b) SST has not provided satisfactory evidence to CAMS that:
(iv)it has effectively modified the wheels of its vehicle;
(v) it has effectively redesigned the anchorage system for the hoods on its vehicles to remove the risk of detachment during the course of a race;
(vi)it has or is about to implement a more rigorous driver training program;[60] and
[60]Ibid [44].
(vii) it can provide sufficiently comprehensive details and compelling evidence of the effectiveness of its proposed modifications and training procedures.
(c) He is particularly concerned about the safety and shortcomings of the SST vehicles in relation to the Gold Coast 600 Event on 19-21 October 2018. This is because the track at that event is often close to grandstands filled with spectators and officials stationed around the track. That is even more so in the case of ‘street’ circuits like the Gold Coast 600 Event, where track is positioned immediately next to pedestrian walkways, grandstands and officials.[61]
[61]Ibid [45].
Schenken also states in his affidavit of 4 October 2018 that:
CAMS’ priority is the safety of spectators, officials and competitors. My experience in the motor sport industry over the last 57 years has given me a detailed understanding of the measures required to maximise the safety of spectators, officials and competitors.[62]
[62]Ibid [42].
His evidence is that:
…based on the incident at Barbagallo and the previous incidents referred to above, there is a significant risk that in the event of a crash of a Super Truck, a vehicle or debris will leave the confines of the closed circuit and cause serious injury or death to a spectator or official.[63]
[63]Ibid [47].
Evidence of the plaintiff’s ability to participate at the Gold Coast 600 Event
The defendant adduced evidence that, irrespective of whether the plaintiff is granted injunctive relief, there is the practical reality that it will be unlikely to participate in the Gold Coast 600 Event. Ms Preston-Dixon deposes that she had a telephone conversation with General Counsel for Supercars on 20 October 2018, in which she was informed:[64]
[64]Ibid [50].
[64]Affidavit of Tahli Preston-Dixon, 4 October 2018 (Preston-Dixon Affidavit) [10].
(a) the plaintiff’s category of contestant in the Gold Coast 600 Event has been replaced by another category, namely the Kumho Tyre Australia V8 Towing Car Series;
(b) the replacement personnel will likely avail themselves of this opportunity, given they have already started preparation for their appearance by booking travel and accommodation; and
(c) the Kumho Category organisation had already incurred significant costs in relation to organising participants in the Gold Coast 600 Event.
Ms Preston-Dixon recognises the remote possibility that the plaintiff could still be included in the Gold Coast 600 Event, however she adds that this scenario would come at great cost and inconvenience.
Ms Preston Dixon concludes her affidavit by offering her personal view that it would not be practical for the plaintiff’s category of vehicles to race at the Gold Coast 600 Event, even if the CAMS suspension was lifted by injunction or otherwise.[65]
[65]Ibid [11].
In reply, by a subsequent affidavit sworn 4 October 2018, Sullivan deposes to a conversation with the Chief Operating Officer of Supercars on 24 September 2018 in which he was informed:
(a) That Supercars was ready, willing and able to honour the Performance Agreement by restoring the plaintiff’s races at the Gold Coast 600 Event if the suspension notice was lifted by the defendant;[66]
(b) That it would in fact be beneficial for Supercars if the plaintiff’s race was reinstated, given the replacement events had triggered cancellations, reduced ticket sales, and were of less interest to the general public; [67] and
(c) That Supercars was prepared to comply with any directives from either the FIA or the defendant requiring alterations to, among other things, the track, fencing and ramps used during the plaintiff’s races.[68]
[66]Affidavit of Sean Sullivan, 4 October 2018 (Sullivan Affidavit), [6.1].
[67]Ibid [6.2].
[68]Ibid [6.3].
With respect to the last point, Sullivan deposes to a conversation with Cayzer on 25 September 2018 in which he was informed that the additional safety fencing required for the plaintiff’s races is readily available and would take one day to install.[69]
[69]Ibid [7].
Plaintiff’s Submissions
I have set out the general principles for interlocutory injunctive relief below. The plaintiff’s submissions and the defendant’s submissions were faithful to these principles.
In summary, the plaintiff submits an interlocutory injunction, of a mandatory nature, is warranted here because:[70]
[70]Plaintiff’s Submissions, 4 October 2018, [2].
(a) there is a serious question to be tried in relation to the breaches of cls 12 and 16 of the CAMS Agreement by the defendant;
(b) the defendant has failed to conduct itself with good faith or use reasonable endeavour to resolve the dispute between the parties;[71]
(c) the plaintiff will suffer irreparable injury for which damages will not be adequate compensation, in particular as a result of damage to the plaintiff’s reputation that will result from breaches of collateral contracts if the injunction is not granted; and
(d) the balance of convenience favours granting of the injunction, with the lower risk of injustice being to allow the plaintiff to comply with its subsisting contractual obligations (including those with third parties).
[71]The plaintiff’s ‘good faith’ allegation in written submissions is with respect to the CAMS Agreement, cl 16 obligations. The plaintiff’s pleading asserts no independent case in relation to ‘good faith’. Further, the evidence on which the plaintiff sought to rely, being the Affidavit of Sean Sullivan sworn 3 October 2018, was not admitted into evidence. The plaintiff also sought to support its argument that the defendant failed to act in good faith, relying on alleged failures to respond to Rutan & Tucker’s request for further information and a factual basis for the suspension.
There is a serious question to be tried
The plaintiff observes that cl 12 of the CAMS Agreement only permits a suspension of the plaintiff’s rights where the defendant ‘reasonably considers’ that there has been or will be a breach. The plaintiff submits the following factors give rise to a serious question to be tried as to whether the defendant held such a belief:[72]
[72]Plaintiff’s Submissions, 4 October 2018, [11].
(a) The defendant’s first response seeking to justify reasons for the suspension identified eight extraneous incidents, seven of which pre-date conclusion of the CAMS Agreement, and seven of which the defendant was aware at the time it signed the CAMS Agreement.
(b) The plaintiff has run two rounds of the 2018 series under the CAMS Agreement and no incident report has been provided in respect of either event, and in particular, in relation to the eighth event that is cited by the defendant in its reasons for the suspension dated 3 July 2018.
(c) A comparable event under the defendant’s control (‘Super Utes’) experienced two rollovers and two wheel detachments in four races. The details of these incidents are described in the Cayzer Affidavit sworn 27 September 2018. The plaintiff points out that the defendant did not suspend the Super Utes series notwithstanding the similarities with incidents involving Super Trucks. Instead, the defendant permitted the convenors to redesign the wheel and axle assembly before continuing to race. For these reasons, the plaintiff submits that the defendant has taken the view the plaintiff’s alleged breaches of the CAMS Agreement, despite being materially similar to the Super Utes incidents, cannot be corrected.[73]
[73]By application heard on 10 October 2018 the plaintiff sought to re-open its application and to adduce further evidence in relation to incidents at the Bathurst 1000 race in New South Wales on the weekend of 6-7 October 2018. The plaintiff’s application was refused and no further material was tendered by the plaintiff, however at the hearing on 10 October 2018, the plaintiff advised that the practical deadline for judgment on its application had changed from 10 October 2018 to 11 October 2018. As a result, delivery of judgment in this matter was re-fixed for 11 October 2018.
Particularly in the latter respect, the plaintiff submits that the conduct of the defendants is in breach of cl 16(d) of the CAMS Agreement.[74] That clause provides in relevant part:
The parties shall negotiate in good faith and use their best endeavours to resolve the dispute.[75]
[74]Plaintiff’s Submissions, 4 October 2018, [12].
[75]Ibid [13].
Accordingly, the plaintiff maintains that the defendant has:
(a) not participated in good faith in the dispute resolution process;
(b) not used its best endeavours to resolve the dispute;
(c) did not have reasonable grounds to issue or maintain the suspension notice;
and, for these reasons, that there is a serious question to be tried as to the plaintiff’s entitlement to relief.[76]
[76]Ibid [13].
Damages are inadequate
The plaintiff also argues that it should be granted the injunction sought because the damages which may be awarded to the plaintiff will be an inadequate remedy. The plaintiff argues that:
(a) it has entered into a number of contracts with third parties pertaining to the broadcasting and sponsorship of the event which will be adversely impacted by the suspension,[77] and breach of such arrangements with third parties will cause irreparable damage to its reputation and bargaining position on a ‘worldwide basis’;[78] and
(b) the suspension of the plaintiff’s rights will continue to cause irreparable damage to the plaintiff’s professional reputation as a ‘reliable motor sport co-ordinator and content supplier’.[79]
[77]Ibid [14]; Cayzer Affidavit, [61]-[68].
[78]Plaintiff’s Submissions, 4 October 2018, [14].
[79]Ibid [15].
On these bases, the plaintiff submits that damage caused cannot be compensated adequately by an award of damages.
Balance of convenience favours granting injunctive relief
The plaintiff also submits there are three reasons why lower risk of injustice favours granting the injunction sought.
(a) The plaintiff has responded to the concerns raised by the defendant (namely in relation to the eight alleged incidents), remains committed to ensuring the safety of spectators, and can satisfy the Court that all safety issues within the plaintiff’s control have been appropriately addressed.[80]
(b) To refuse the injunctive relief sought would compromise the plaintiff’s performance of driver, broadcasting and sponsorship contracts with third parties.
(c) In contrast to the irreparable damage that will be suffered by the plaintiff, the defendant, by contrast, will suffer no damage if the injunction is granted.
[80]Ibid [17].
Defendant’s submissions
The defendant’s submissions were also faithful to the organising principles for interlocutory injunctive relief and not in conflict with the plaintiff’s submissions on this aspect. Broadly, the defendant’s submission can be summarised as follows:[81]
[81]Defendant’s Submissions, 4 October 2018, [2].
(a) having regard to the strength of the plaintiff’s prima facie case and the serious safety concerns identified by the defendant, the balance of convenience does not favour granting an injunction;
(b) in the unlikely event that the plaintiff is successful at trial, damages will be an adequate remedy; and
(c) there is, at the very least, serious doubt as to whether the injunction will be of any practical benefit, given the limited prospect of the plaintiff being able to participate in the Gold Coast 600 Event at this late stage.
The plaintiff does not have a sufficiently strong case
Generally, the defendant asserts that the plaintiff’s allegations of breach are at odds with the broad contractual discretion that it is afforded to CAMS under cl 12 of the CAMS Agreement. On this first limb to its argument, the defendant submits:
(a) The CAMS Agreement provides the defendant with ‘broad rights’ to assess safety concerns arising from the SST Series and to take action if and when it considers appropriate.[82] Those broad rights should, on the defendant’s submission, be understood in light of the fact that the defendant is, among other things, the governing body for motor sport in Australia and its role is focused on securing and enhancing the safety of participants, officials, referees and spectators.[83]
[82]Ibid [7].
[83]Ibid [2], [6].
(b) The qualification ‘reasonably considers’ in cl 12 of the CAMS Agreement, which conditions the exercise of the defendant’s power to suspend the CAMS Agreement, only requires:
(viii) that the relevant belief or opinion was actually held by CAMS; and
(ix) that the facts are sufficient to induce that belief or opinion in a reasonable person.[84]
(c) There is no reason to doubt that those two elements will be satisfied in the immediate case. The defendant convened a Working Group of experienced personnel to consider the incident and an appropriate response. Those persons had regard to a number of previous safety incidents involving the Series in forming their view that it posed an unacceptable risk to the safety of participants, officials, referees and spectators and that immediate suspension was appropriate. An incident report prepared by McGrath confirmed the view of the Working Group.[85]
[84]Ibid [8]; Androvitsaneas v Members First Broker Network Pty Ltd [2013] VSCA 212, [83].
[85]Defendant’s Submissions, 4 October 2018, [9].
In summary, the defendant submits that:
(a) it considered the matters raised by the plaintiff in response to the suspension;
(b) it formed the view that there remains an unacceptable risk to participants, officials, referees and spectators; and
(c) it decided to suspend the CAMS Agreement, and thereafter, maintain the suspension.
The defendant submits that course of action satisfies the sole qualification on the suspension power in cl 12(a) of the CAMS Agreement, that the defendant must only ‘reasonably consider’ there has been a breach of the agreement.
The balance of convenience favours refusing the injunction
The defendant points out that the balance of convenience here entails considerations beyond the immediate contractual context.
In this particular case, the defendant submits the Court must weigh the private interests of the plaintiff against the legitimate and broader public safety concerns identified by the defendant. That the defendant is the ‘governing body’ responsible for motor sport safety and the holder of the relevant insurance policy are said to carry particular weight in evaluating the balance of convenience.[86] The defendant adds that this emphasis on public safety is supported in the authorities.[87]
[86]Ibid [11].
[87]Ibid [10]. The defendant cites XY v WA Country Health Service [2016] WASC 202, [110]-[111] (Pritchard J) and Construction, Forestry, Mining and Energy Union v Peabody Energy Australia Coal Pty Ltd [2014] FCA 394, [15].
In substance, the defendant reiterates the safety concerns identified above that have been summarised from the affidavit material. Briefly, these include:[88]
[88]Defendant’s Submissions, 4 October 2018, [12].
(a) the Nolan Incident evoking serious safety concerns, given a Super Truck rolled multiple times after landing on a single wheel after a jump, resulting in a wheel becoming airborne and striking a pedestrian bridge five metres above the track and the centre hub of the wheel travelling over, and beyond, a 3.5-metre-high debris fence;
(b) that there have been seven other safety incidents involving the Series which were a cause for concern for CAMS;
(c) that the race circuits used for the Series races cannot safely accommodate the Super Trucks travelling a high speeds, jumping over ramps and through the air, given spectators and officials are stationed around the track and previous incidents demonstrate that wheels or debris could cause serious injury or death; and
(d) that Super Trucks are designed for jumping onto soft off-road surface tracks as opposed to closed circuit racing.
The defendant submits that the responsive actions taken, or proposed to be taken, by the plaintiff are unsatisfactory for the following reasons:
(a) the proposals for changes to the wheel and hood design are not supported by testing, modelling or independent analysis[89] and in any event, the proposed changes would likely be superfluous in light of the observations made in the McGrath Affidavit;[90] and
(b) the proposals for amendments to the driving training program and underlying manuals, procedures and policies are vague and uncorroborated, such that the detail of the changes cannot be understood by the defendant, and there is an outstanding question of whether the proposed changes would in any event be in place prior to the event commencing 19 October 2018.[91]
[89]Ibid [13].
[90]McGrath Affidavit, [30], [41], [42].
[91]Defendant’s Submissions, 4 October 2018, [13].
Damages are an adequate remedy
The defendant makes the following submissions in relation to the adequacy of damages:
(a) The defendant rejects the plaintiff’s assertion that damages would be more difficult to quantify than is usually the case for breach of contract. The defendant contends that this assertion has not been substantiated. Moreover, the defendant points out that quantification difficulties are not in any event, per se, a basis for concluding that damages are inadequate.[92]
(b) The defendant rejects the general assertions as to the plaintiff’s reputational harm. It submits that this is conjecture and there is a noticeable lack of corroborating evidence supporting this point. It also doubts whether ‘reputation’ is an important factor in the plaintiff’s industry. In any event, the defendant submits that the plaintiff assumed the risk of reputational damage that is associated with the defendant’s right to suspend the CAMS Agreement when it decided to enter into the contract.[93]
(c) The defendant also points to cl 12(c) which purports to limit CAMS’ liabilities for loss and damage suffered by the plaintiff resulting from the suspension. The defendant submits that it would be in conflict with the parties’ bargain and be at odds with the CAMS Agreement if the plaintiff could, in effect, ‘side step’ the provisions of cl 12(c) of the CAMS Agreement, by obtaining an injunction preventing a suspension on, or partly on, the basis that damages to the plaintiff for wrongful suspension by CAMS would be inadequate.
[92]Ibid [17].
[93]Ibid [18]–[19].
There is no utility in the grant of the injunction
The defendant also submits that there remain serious doubt about the prospect of the plaintiff being able to participate in the Gold Coast 600 Event at this late stage, in the event if an injunction is granted.[94]
[94]Ibid [21]–[22].
Considerations
Currently, the plaintiff’s rights under the CAMS Agreement are suspended. The plaintiff seeks an injunction requiring the defendant to take action restoring its rights under the CAMS Agreement, namely, withdrawal of the suspension notice; and enjoining the defendant from issuing further suspensions that prevent the plaintiff from performing its contractual obligations at the Gold Coast 600 Event which will be held in a little over a week’s time. The restoration of the rights referred to under the CAMS Agreement will, in practical terms, ensure that the plaintiff can fulfil the terms of the Performance Agreement with Supercars.
To determine whether it is appropriate to grant an interlocutory injunction of the type sought, the Court should consider the following inter-related questions framed by reference to the ‘organising principles’ identified by High Court of Australia (High Court) in Australian Broadcasting Corporation v O’Neil:[95]
[95](2006) 227 CLR 57.
(a) Is there a serious question to be tried,[96] or does the plaintiff have a prima facie case,[97] such that the plaintiff could be entitled to relief after trial of the action;
(b) Is the plaintiff likely to suffer injury for which damages will not be an adequate remedy;
(c) Does the balance of convenience support granting an injunction.
[96]Ibid 68 (Gleeson CJ and Crennan J).
[97]Ibid 82 (Gummow and Hayne JJ).
In evaluating the matters referred to, including the synthesis of the likelihood of success with the balance of convenience, the Court should also be disposed to take ‘whichever course appears to carry the lower risk of injustice if it should turn out to have been “wrong”‘.[98]
[98]Bradto Pty Ltd v State of Victoria (2006) 15 VR 65, 73.
Strength of the plaintiff’s case
In Beechem Group Ltd v Bristol Laboratories Pty Ltd,[99] the High Court observed:
…whether the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief… How strong the probability needs to be depends, no doubt, upon the nature of the rights he asserts and the practical consequences likely to flow from the order he seeks.[100]
[99](1968) 118 CLR 618.
[100]Ibid 622 (citations omitted).
With respect to the above passage, in Australian Broadcasting Corporation v O’Neil,[101] Gummow and Hayne JJ observed:
By using the phrase ‘prima facie case’, their Honours did not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed; it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial.[102]
[101](2006) 227 CLR 57.
[102]Ibid 82 (emphasis added).
Relevant terms of the CAMS Agreement
As earlier detailed, the legal basis for the CAMS’ suspension of the plaintiff’s rights was said to lie in breaches or likely breaches of cls 4(d)(iii), 5.2(c), 5.3(a(ii)A and B, and 5.8(1)(ii) and (iv). These clauses provide in relevant part:
4 Series Manager Acknowledgements
The Series Manager agrees and acknowledges that:(d)this Agreement carries certain restrictions in respect of the Series, and that such restrictions are necessary and reasonable in the public interest and for the purposes of protecting motor sport including the:
(iii)conduct and operation of motor sport in Australia to ensure that it is carried on in a manner which secures and enhances the safety of participants, officials, referees and spectators and which allows the sport to be competitive and fair…
5.2 Maintenance of the Series
The Series Manager must maintain and generally improve the quality, size, success and viability of the Series. Without limiting this obligation, the Series Manager must:(c)act in such a way as to enable CAMS, the FIA, their related entities, event promoters and organisers, venue operators, Supplied Personnel, officials, Competitors, manufacturers, sponsors, commercial partners and broadcasters to meet their respective public interest, commercial and sporting objectives and obligations…
5.3 Rules, Policies and Procedures
(a) The Series Manager must:(ii)comply with (and ensure that it’s contractors, employees and agents comply with) the directions, rules, policies and procedures of CAMS, the FIA, their related entities, event promoters and organisers of a Round, venue operators at each Round, officials at each Round, the Supplied Personnel and broadcasters in the management of the Series, as may be amended from time to time including CAMS’ policy of Safety 1st. In respect to CAMS’ Safety 1st policy the Series Manager must to the satisfaction of CAMS:
(A)adopt and implement the CAMS’ Safety 1st policy and any CAMS occupational health and safety policies from time to time in the conduct of the series; and
(B)develop and implement its own occupational health and safety policies and processes and ensure that such policies and processes are adopted by the Series Manager and Competitors in the Series.
in order to provide the safest possible environment for Competitors, officials and the general public, not enter the Series in any meeting other than a meeting in respect of which a CAMS organising permit has been issued; and track license is held…
5.8 Operation of the Series
(a) The Series Manager must:(ii)ensure the adoption and enforcement of appropriate safety standards and risk management procedures for the Series which are acceptable to CAMS (including complying with CAMS Safety 1st priority);…
(iv)report any serious incidents at an Event to CAMS immediately and in any event within 2 Business Days of them occurring.
The above CAMS Agreement terms include several obligations, imposed on the plaintiff as Series Manager, to secure and enhance the safety of participants, officials, referees and spectators at relevant race events.
In particular, the plaintiff is obliged to adopt and implement ‘CAMS’ Safety 1st Policy’ and CAMS’ occupational health and safety policies.
Broadly, the plaintiff is required to act in a way which will enable CAMS to meet its public interest obligations, the foremost of which appears to be its obligation to secure the safety of those involved in or present watching racing events, including by the plaintiff adopting and enforcing appropriate safety standards and risk management procedures for the relevant SST events which are acceptable to CAMS and compliant with CAMS’ ‘Safety 1st Policy’.
CAMS’ suspension power is found in cl 12(a) of the CAMS Agreement:
Where CAMS reasonably considers that there has been, or is likely to be a breach of this Agreement by the Series Manager, CAMS may issue a written notice to the Series Manager which suspends the Series Manager’s rights under this Agreement. Upon issue of such notice and until such time as CAMS notifies the Series Manager that the suspension is lifted or the Agreement is otherwise terminated the Series Manager may not organise or hold any Round of the Series.
Analysis of the suspension power
The requirement that the defendant ‘reasonably considers’ there has been or is likely to be a breach of the CAMS Agreement is a condition precedent to exercising the right of suspension under cl 12(a). If the defendant purports to suspend the CAMS Agreement, but does not reasonably consider that there has been or is likely to be a breach by the plaintiff then, prima facie, the defendant will itself breach the CAMS Agreement.
In relation to an analogous provision, the defendant referred to Androvitsaneas v Members First Broker Network Pty Ltd (Members First Broker Network),[103] in which the Victorian Court of Appeal observed:
There was no debate between the parties as to the meaning of ‘reasonably consider’. Members First submitted that ‘reasonably consider’ means, in this context, ‘consider on reasonable grounds’. If that is the case, Members First then submitted, the phrase contains two requirements: first, that the relevant belief or opinion is actually held; and second, that facts exist that are sufficient to induce the belief or opinion in a reasonable person.[104]
[103][2013] VSCA 212.
[104]Ibid [83].
While the meaning given to the same words and phrases in previous cases is not decisive, in such an instance it can be instructive. In my view, here the plaintiff must demonstrate to the degree of assurance required for an interlocutory injunction, of an essentially mandatory nature in the present context, that:
(a) the relevant opinion or belief in a breach or likely breach of the CAMS Agreement was not actually held by CAMS; or
(b) the facts which existed, or were likely to come into existence, would not have induced that opinion or belief in a reasonable person.
The plaintiff submitted that the defendant did not ‘reasonably consider’ that the plaintiff had been or was likely to be in breach of the CAMS Agreement. This is the principal basis on which the plaintiff argues there is a prima facie case, or a serious question to be tried, in relation to the defendant’s breach of contract arising from its alleged wrongful use of the suspension power.
However, in respect of the defendant’s contrary contention that there is no prima facie case or serious issue exposed by the plaintiff, it is to be recognised that the phrase ‘reasonably considers’ provides a broad contractual discretion to CAMS. This ensures suspension decisions are immunised from liability for breach of contract unless it can ultimately be shown that CAMS did not in fact consider that there had been or was likely to be a breach of the Agreement, or that there is no basis upon which CAMS could have reasonably come to the view.
On the present evidence adduced by CAMS and referred to above, I am not satisfied that the plaintiff has either presented a prima facie case or, identified a serious issue with any real prospect of success at trial, in relation to its contention that CAMS did not at the time of suspension, or thereafter, hold the necessary belief or opinion.
In addition, given the existence of the same evidence, I am not satisfied that the plaintiff has presented a prima facie case, or identified a serious issue with any real prospect of success at trial, that there were at the relevant times, insufficient facts and expert opinions to induce the requisite belief or opinion in a reasonable person.
Moreover, I consider the opinion or belief held by CAMS, that the plaintiff had breached or was likely to breach the CAMS Agreement, was reasonable in the circumstances, including for the following reasons:
(a) the burden of the evidence, which for present purposes I accept at this interlocutory stage of the plaintiff’s proceedings, in my view, establishes that the SST Series poses a significant potential safety risk to participants, officials, referees and spectators. Indeed, in this regard the plaintiff has not seriously contested that the Nolan Incident was other than one which gave rise to a potentially serious risk to the participants, officials, referees and spectators attending and involved in that or similar events;
(b) the Nolan Incident, which involved the separation of a substantial and weighty component of the relevant Super Truck, namely its rear left wheel, was exacerbated by the wheel becoming airborne to a height of about 5 metres above the track and metal debris from the hub of that wheel being propelled some considerable distance and at a height exceeding the 3.5 metre ‘debris fence’. This too constituted a serious safety concern and a potentially significant risk to the participants, officials, referees and spectators at the event;
(c) the expert view of the CAMS Working Group and executive is that the Super Truck racing events give rise to serious safety concerns. These events involve the high speed traversal of ramps and airborne jumps by those vehicles with associated heavy landings on closed circuit race-tracks. Recent history demonstrates serious safety incidents have occurred in SST series,[105] and the risk associated with such incidents is aggravated by the close proximity of officials, referees and spectators to the race track;
(d) further, the safety concerns referred to in the last sub-paragraph may well be aggravated by plans for the forthcoming Gold Coast 600 Event between 19 and 21 October 2018 to be conducted on a ‘street circuit,’ with pedestrian walkways and spectator facilities located adjacent to the race-track; and
(e) there is a serious, significant and unacceptable risk that, in an event in which the SST series is taking place, and arguably in particular on the Gold Coast 600 track, a weighty wheel or other debris from a Super Truck may break away from that vehicle and be catapulted beyond the immediate racing circuit into adjacent areas where participants, officials, referees and spectators are accommodated, causing serious injury or death to those persons.
[105]Schenken Affidavit, [35].
The materials presented in this application include a body of expert evidence from the plaintiff suggesting it has or proposes to make operational changes addressing safety concerns that arise out of past incidents, so as to ensure the safety of participants, officials, referees and spectators at the Gold Coast 600 Event. In response, the defendant’s evidence, including expert evidence, opines that the plaintiff’s current modifications and proposals are untested and provide no concrete assurances that the safety of participants, officials, referees and spectators will be improved or ensured.
In an urgent interlocutory application such as the current application in this proceeding on untested affidavit materials, the Court is unable to nicely or reliably evaluate which of the two sets of technical assertions is probably correct.
I am, however, not satisfied on the state of the present evidence that the proposals made by the plaintiff to modify its Super Truck vehicles and its rules, and to improve the training of its drivers, will materially alleviate the serious safety concerns to which I have referred. That lack of assurance is more acute given the proximity of the Gold Coast 600 Event in about a week’s time.
For these reasons and those which follow, I also consider that the view of CAMS and its Nolan Incident Working Group should be given particular weight. That evidence arises from the expertise and experience of individuals charged with relevant responsibility within CAMS’, which is the administrator and regulator of motor sports in Australia, with an attendant public interest in ensuring the safety of participants and spectators present at the race track. In my view, this provides ample justification for such an approach.
Furthermore, I consider that there is little or no relevance to be ascribed to the plaintiff’s argument that CAMS has failed to fulfil its obligation to ‘reasonably’ consider a breach or likely breach by the plaintiff in relation to the Nolan Incident on 5 May 2018 because seven earlier incidents involving the plaintiff were known to CAMS before 20 February 2018 when the CAMS Agreement was signed. I do not recognise the force of the plaintiff’s argument that somehow CAMS was, in the circumstances, acceptant of the plaintiff’s rules and procedures, mode of operation, and vehicles, as a result.
Nor, in my view, should any weight be given to the plaintiff’s observation that it has conducted two rounds of the SST Series under the terms of the CAMS Agreement in March and May 2018 with no ‘incident report’ being provided by CAMS in relation to those events. The material and relevant fact is that CAMS has now formally raised serious safety issues in relation to the plaintiff’s participation in the 5 May 2018 Perth SST Event and has issued a Suspension Notice dated 8 May 2018 under the CAMS Agreement following that incident.
Nor, in my view, does it materially impinge upon these considerations that in a series of events involving quite different vehicles, namely the Super Utes, the competitors in those events experienced two roll-overs and two wheel detachment incidents in four races and CAMS did not suspend that series of events but allowed the relevant competitors to redesign the wheel and axle assembly of their vehicles and continue to race.
In its submissions, the plaintiff complains that the approach adopted by CAMS in relation to the plaintiff on 8 May 2018 is ‘in stark contrast to the approach adopted with Super Utes’.[106] In my view, however, the evidence put on by the plaintiff and its submission in relation to this asserted inconsistent approach by CAMS falls far short of arguably establishing that CAMS has failed to reasonably consider the incident in respect of which it suspended the plaintiff’s right to compete on 8 May 2018. The evidence in this application fails to establish any close analogy of vehicle, racing environment or vehicle operation giving rise to wheel detachments and roll-overs of Super Utes with either Super Trucks or the Nolan Incident.
[106]Plaintiff’s Submissions, 4 October 2018, [11(c)].
It does not follow that, because CAMS had not prior to 3 July 2018 raised the seven points of concern prior to the Perth Super Sprint event on 5 May 2018, that the plaintiff’s participation in those earlier seven events must have been compliant with the CAMS Agreement. Nor does this circumstance provide a cogent basis to conclude that CAMS did not in fact reasonably consider that as at 8 May 2018 the plaintiff had breached or was likely to breach the CAMS Agreement, or that CAMS acted unreasonably or in bad faith in its approach to the enforcement of the CAMS Agreement after the seventh of the concerns expressed in CAMS letter of 3 July 2018 in relation to the Perth Super Sprint 2017.
Nor, in my view, does it exhibit ‘bad faith’ on the part of CAMS that, prior to 8 May 2018, no complaint was made in relation to either the earlier seven incidents referred to in CAMS letter of response dated 3 July 2018 or that no complaint regarding the incident on 5 May 2018 was communicated by CAMS to the plaintiff between the date of the Nolan Incident and CAMS’ Notice of Suspension dated 8 May 2018.
Adequacy of damages
The starting point in relation to a consideration of the adequacy of damages in this context is captured in the following statement:
The very first principle of injunction law is that prima facie you do not obtain injunctions to restrain actionable wrongs, for which damages are the proper remedy.[107]
[107]London and Blackwall Railway Co v Cross (1885) 31 Ch D 354, 369.
However, an injunction will be granted where the rights of the plaintiff cannot be adequately protected via an award of damages:
…in this case an action for damages would not afford an adequate remedy, and that we should give effect to the rule that where the plaintiff has established the invasion of a common law right, and there is ground for believing that without an injunction there is likely to be a repetition of the wrong, he is, in the absence of special circumstances, entitled to an injunction against such repetition.[108]
[108]Beswicke v Alner [1926] VLR 72, 76.
The plaintiff contended that damages would not be an adequate remedy. In the event an injunction is not granted, the plaintiff submits it would incur losses including in respect of third parties with whom it had contracted for broadcasting and sponsorship rights.
The plaintiff also submits that the suspension of its rights in respect of the Gold Coast 600 Event will cause irreparable damage to its professional reputation as a reliable motor sport co-ordinator and ‘content supplier’. The plaintiff suggested that such reputational damage could additionally cause a loss of bargaining power and affect the marketing of its future events worldwide.
I consider however that the plaintiff has not adduced any persuasive evidence or submission in relation to what it says would either be its financial damage or the asserted harm to its reputational and bargaining position in the future if this injunction is refused.
In this regard, there is in my view no persuasive evidence put forward by the plaintiff that it enjoys any particular reputation or that the SST rounds of competition enjoy such a reputation. For this reason, I accept the defendant’s submission that, in the circumstances, the evidence of the possibility of reputational damage to the plaintiff is at such a high level of generality that it does not in reality rise above mere assertion, and therefore should only be given very little weight.
Further, the parties have struck a bargain that is reflected in the CAMS Agreement. In particular, cl 12 of the CAMS Agreement prima facie establishes that the plaintiff has assumed the risk of and accepted it may suffer damage, including reputational damage, as a result of the plaintiff’s agreement to CAMS’ broad power to suspend the relevant contract in accordance with cl 12.
The plaintiff has also acceded and agreed to broad limitations upon its entitlement to damages by reason of cls 12(b), (c), (d) and (e) of the CAMS Agreement. In my view, these agreed strictures in relation to the plaintiff’s recovery of damages, as a result of its agreement in cl 12(b) to (e) of the CAMS Agreement, weigh significantly against the plaintiff being otherwise entitled to argue that damages would be an inadequate remedy.
Ultimately, for the above reasons, I find that damages, conditioned as may be the case by the terms of cl 12 for the CAMS Agreement, will be an adequate remedy if the plaintiff were successful at a trial of these issues.
Balance of convenience
In Bradto Pty Ltd v State of Victoria,[109] Maxwell P and Charles JA observed:
…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.[110]
[109](2006) 15 VR 65.
[110]Ibid 73.
While a direction to perform an act is often more intrusive than a direction to cease performing an act, such considerations can be assessed as part of the overall balance of convenience. That the relief sought can be described as in effect ‘mandatory’ should not entail a more onerous test or demand a heightened degree of assurance in its correctness.
The point is explained by Edelman J:
In some, perhaps many, cases where an interlocutory mandatory order is sought, considerations involving the balance of convenience will include the extent to which the order intrudes upon the liberty of the respondent. Another relevant consideration may be whether a defendant who has raised a triable issue will be deprived, by a mandatory order, of a full hearing of the issue if the effect of that mandatory order is final determination of the proceedings. But these matters can, and should, be assessed as part of the balance of convenience.[111]
[111]JTA Le Roux Pty Ltd (as Trustee for the FLR Family Trust) v Lawson (No. 2) [2013] WASC 373, [23].
In relation to the consideration as to the balance of convenience, the Court may have regard to whether the interests of third parties would be affected by the decision to grant or withhold injunctive relief. In Wood v Sutcliffe,[112] in a passage quoted by the High Court,[113] and subsequently in England,[114] Sir Richard Kindersley VC observed:
…whenever a Court of Equity is asked for an injunction in cases of such a nature as this, it must have regard not only to the dry strict rights of the Plaintiff and Defendant, but also to the surrounding circumstances, to the rights or interests of other persons which may be more or less involved: it must, I say, have regard to those circumstances before it exercises its jurisdiction (which is unquestionably a strong one), of granting an injunction.[115]
[112](1851) 2 Sim (NS) 163; 61 ER 303.
[113]Patrick Stevedores Operations No. 2 Proprietary Limited v Maritime Union of Australia (1998) 195 CLR 1, 41–42 (Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ).
[114]Miller v Jackson [1977] QB 966, 988 (Cumming-Bruce LJ).
[115]Wood v Sutcliffe (1851) 2 Sim (NS) 163, 165-66.
In Gedbury Pty Ltd v Michael David Kennedy Autos,[116] Thomas J concluded:
In my view the effect on other parties and persons in the community is not without relevance. The plaintiff may later obtain possession against another innocent buyer if the chain of title is allowed to multiply. If the plaintiff obtained possession against a specific purchaser, such person could never recover the car from the plaintiff and would be in a completely disadvantageous position. No arrangement has been proposed in this matter that would prevent inconvenience or damage to others, or which would prevent a multiplicity of claims backwards up the chain of title…The potential effect on third parties may, in appropriate cases, be a relevant consideration in the granting or refusing of an injunction…At the end of the day, in the present application, this is the factor which tips the scales in favour of the plaintiff on the balance of convenience.[117]
[116][1986] 1 Qd R 103.
[117]Ibid 105 (Thomas J).
The weight to be given to the interests of third parties will vary according to the circumstances.[118] However, concerns over safety, whether for the parties, the general public or unrelated third parties, can weigh heavily on the balance of convenience, and for the reason I have outlined above, should in my view do so here.[119]
[118]Patrick Stevedores Operations No. 2 Proprietary Limited v Maritime Union of Australia (1998) 195 CLR 1, 42 (Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ).
[119]See, eg, XY v WA Country Health Service [2016] WASC 202, [110]-[111].
On the evidence, I am satisfied that there is a real and substantial potential risk to the safety of participants, officials, referees and spectators arising from the possibility of a further incident like the Nolan Incident which occurred on 5 May 2018.
The defendant is responsible for the public interest in ensuring safety across the motor sport events in Australia over which it has control.
I am not satisfied, for the reasons I have earlier outlined, that the plaintiff’s proposed modifications will satisfactorily address the identified substantial safety risk.
In my view, the issue of public safety interest and risk referred to above should be given very significant weight in considering the balance of convenience. In the circumstances of this matter, I consider that this factor easily outweighs not only the earlier mentioned arguable elements of prejudice sought to be relied on by the plaintiff but also the matters of third party harm and prejudice cited in aid of the relief sought by the plaintiff.
Accordingly, in my firm view, the proper course is to refuse the plaintiff’s application. In these circumstances, maintaining the status quo carries the lower risk even if it ultimately transpires that refusal of the injunction was in error and the plaintiff succeeds on its claims at trial.
Decision
For the above reasons, I consider that the plaintiff should not be granted the urgent interlocutory injunctive relief sought by its Summons dated 1 October 2018 and in its submissions and attached draft orders dated 4 October 2018.[120] In summary, this is principally because:
[120]See proposed orders attached to the Plaintiff’s Submissions, 4 October 2018, pg. 6.
(a) the plaintiff has not shown a sufficiently strong prima facie case or serious questions to be tried with sufficient prospects of success in relation to the defendant’s alleged breaches of the CAMS Agreement;
(b) under the CAMS Agreement, the defendant is afforded a broad contractual discretion entitling CAMS to suspend the plaintiff’s rights as Series Manager of the SST Events in the event that CAMS ‘reasonably considers’ that there has been or was likely to be a breach of the CAMS Agreement;
(c) I am not satisfied that the plaintiff has shown that at trial, based on the present evidence, it would enjoy a sufficient likelihood of establishing that CAMS is in breach of the CAMS Agreement because CAMS did not at the relevant time hold the belief or opinion that the plaintiff was in breach of or likely to breach the subject agreement, or because CAMS did not have a reasonable basis for such belief or opinion, or because CAMS was for another reason relevantly in breach;
(d) the plaintiff has not shown that damages awarded at a trial of the action would be an inadequate remedy; and
(e) the balance of convenience, and in particular the public interest in relation to the significant potential safety concerns identified by the defendant, decisively support refusing urgent interlocutory injunctive relief in this case.
Orders
I order that the plaintiff’s Summons dated 1 October 2018 be dismissed.
I order that the plaintiff pay the defendant’s costs of and associated with the plaintiff’s application by Summons dated 1 October 2018 on a standard basis.
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