Spotless Catering Services Ltd v Western Mining Corporation Ltd
[1987] FCA 247
•27 July 1987
Re: SPOTLESS CATERING SERVICES LTD
And: WESTERN MINING CORPORATION LIMITED
No. WAG77 of 1987
Trade Practices
COURT
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
French J.(1)
CATCHWORDS
Trade Practices - interlocutory relief - contract for provision of catering and cleaning services to mining company - licence to occupy supermarket premises - termination on notice clauses in contract and in licence - precontractual promises not to terminate except on cessation of mining operation - serious question to be tried - doubtful claim - balance of convenience even - claim for interlocutory relief dismissed.
Trade Practices Act 1974
Co-Operative Bulk Handling Limited v. Waterside Workers Federation of Australia and Others (1983) 51 ALR 79
Bullock and Others v. The Federated Furnishing Trades Society of Australasia and Others (1985) 5 FCR 464
J.C. Williamson Ltd v. Lukey & Mulholland (1931) 45 CLR 289
Ampol Petroleum Ltd v. Mutton (1952) 53 SR(NSW) 1
HEARING
PERTH
#DATE 27:7:1987
Counsel for the applicant: Mr C. Pullin and Mr Stone instructed by Northmore Hale Davy & Leake
Counsel for the respondent: Mr R. Meadows and Mr J. Vaughan instructed by Freehill Hollingdale & Page
ORDER
Claim for interlocutory relief dismissed.
Costs reserved.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
Western Mining Corporation Limited ("WMC") conducts a nickel mine at Windarra near Laverton in Western Australia.
Since 1980 catering and cleaning services for that operation have been provided under contract by Nationwide Field Catering Pty Ltd ("Nationwide") and since June 1986 by its assignee, Spotless Catering Services Ltd ("Spotless").
WMC has engaged new contractors for the provision of these services. It has given Spotless 28 days' notice of termination of the contract effective on 29 July 1987.
It has also given to Spotless notice of termination of a licence to occupy supermarket premises from which Nationwide and Spotless have conducted a supermarket business since September 1984. That notice takes effect from close of business on 14 August 1987.
The catering and cleaning contract, although expressed to be for a term of three years contained a provision enabling WMC to terminate in its absolute discretion on 28 days' written notice to Nationwide.
Spotless now says that before the contract was signed, WMC had represented that it would only terminate in the event that it ceased to carry on mining at Laverton.
The contract was, it is said, executed on that basis. It was because of a like representation that Nationwide agreed to purchase the business of the supermarket at Laverton, to occupy it under licence from WMC, the owner of the freehold, and to operate it as a supermarket.
Spotless has now instituted proceedings in which it seeks damages for contravention of s.52 of the Trade Practices Act and for breach of contract. It seeks final and interlocutory injunctive relief in relation both to the termination of the contract and the supermarket licence.
The claim for interlocutory relief has come before this Court as a matter of urgency.
It is expressed as follows:-
"1. An injunction restraining the Respondent from terminating the contract until the trial of this action or further order;
alternatively, an order restraining the Respondent from granting a contract for the provision of catering and domestic services to any person save the Applicant until the trial of this action or further order.
2. An injunction restraining the Respondent from terminating the Respondent's (sic) occupancy of the Four Square Supermarket, Laverton until the trial of this action or further order; or Alternatively, an order restraining the Respondent from permitting any other person to enter into occupation of the supermarket so as to conduct a retail business therein until the trial of this action or further order. An injunction restraining the Respondent from treating the notice to determine the Applicant's occupancy of the supermarket as a valid notice.
3. An order pursuant to Section 87 of the Trade Practices Act 1974 (Cth) restraining the Respondent from:-
i. determining the Contract;
ii. determining the Applicant's occupancy of the supermarket."
Factual Background
In support of its claim Spotless relied upon an affidavit sworn by John Leonard McLean, formerly Nationwide's Operations Manager, (Western Australia).
He is now State Manager of a division of Spotless known as "Nationwide Field Catering".
The corporate re-organisation that led to Spotless supplanting Nationwide took place in June 1986.
Nationwide was a wholly owned subsidiary of Nationwide Holding Limited which was in turn controlled by Spotless Group Limited.
Under the re-organisation all rights and liabilities of Nationwide were assigned to Spotless with notice to all Nationwide's clients. WMC evidently consented to the assignment insofar as it related to dealings between itself and Nationwide.
After the assignments Spotless provided the same service by the same staff and with the same direction as had been the case under Nationwide.
Initially the services had been provided for a period of three years to October 1983. This contract was renewed for 12 months from 21 October 1983 and for a further 12 months from 21 October 1984.
Nationwide's dealings with WMC were largely through John Patrick Fox, who was employed as that company's personnel superintendent at Windarra from March 1982 until March 1987, when he retired because of ill health.
It seems to be common ground that in 1984, Fox told McLean and Nationwide's then general manager, Mr Terry Metcalf, that it would be a good idea to formalise their contractual arrangements.
Both parties agreed in those discussions that the contract should run for a further three year term.
Ultimately a deed was prepared and executed, although the circumstances of its preparation are in dispute.
It contained a termination clause which provided:-
"12.1 The Company may at any time in its absolute discretion terminate the Contract in whole or in part by giving the Contractor twenty eight (28) days prior notice in writing to that effect."
Nationwide had, according to Fox, initially prepared its own draft contract which was revised by WMC before execution.
That draft, a copy of which was exhibited to Fox's affidavit, contained a termination clause in terms identical to that which appeared in the contract as executed.
McLean says the contract was prepared by WMC and that Nationwide did not think it necessary to engage their own solicitors in that regard.
He and Metcalf raised the question of the termination clause with Fox who said it was WMC's intention that the agreement should run for a fixed 3 year term and would only be determinable on notice in the event of the cessation of mining operations at Windarra. This, it was said, was the effect of the clause.
It is difficult to understand how McLean could have accepted that the clause had such a limited effect given its plain language conferring an "absolute discretion" to terminate on notice "at any time".
In an affidavit filed in opposition to the claim Fox denied discussing the meaning of the termination clause with Metcalf or McLean. He said he was always careful not to say or do anything which would commit WMC.
He had he said, made it clear to Metcalf and McLean that the respondent would require a termination clause.
In his affidavit Fox said that WMC required a termination clause to enable it to terminate in the event that Nationwide did not perform properly and in the event that mining operations ceased at Windarra.
McLean says that before the contract was executed, Fox approached Nationwide in connection with a supermarket in Laverton, the freehold of which was held by WMC. The business of the supermarket was up for sale by its then proprietor a Mr McCulloch.
According to McLean Fox suggested that Nationwide purchase the business. WMC he said wanted a reliable operator in the supermarket.
He said that Fox repeated his earlier representations that WMC would grant Nationwide a fixed 3 year term on the catering and cleaning contract and went further to say that Nationwide could stay in the supermarket premises as long as it wanted to operate a business there.
Not without some reluctance, Nationwide decided to purchase the business and paid the following sums in accordance with that takeover.
1. $15,000.00 for goodwill.
2. $40,000.00 for plant, fixtures and fittings.
3. $67,000.00 for stock.
4. $27,314.00 for alterations and additonal fixtures and fittings.
Nationwide's purchase of the supermarket business was completed in September 1984.
Fox's version of these events differs sharply insofar as he denies giving any assurances as to what WMC would or would not do in relation to the catering and cleaning contract.
He says that when he became aware that the supermarket was up for sale, he spoke to McLean and said that if Nationwide wanted to be in it he would have no objection.
Arrangements for the occupancy of the supermarket were reflected in a letter dated 27 September 1984 from WMC to Nationwide. The letter exhibited to an affidavit of Mr Peter Bartlett, Resident Manager for WMC at Laverton since December 1985, said among other things:-
"....we now confirm as follows:
1. Pending a significant increase in the turnover of the supermarket the weekly rental of $100.00 will be fully subsidised by us.
2. A full subsidy will be provided on charges from the Laverton Shire covering power and light consumed in the supermarket. The corporation will refund to you an amount equivalent to the discount rate on presentation of the paid account. This subsidy will continue in the event that the State Energy Commission of Western Australia assumes the responsibility for the distribution of power within Laverton.
3. Charges levied by the Shire of Laverton for sundry services, including removal of waste, will be fully reimbursed on the presentation of the receipted account.
The above arrangements will continue in force subject to annual review by us and subject further to termination by either party on the giving of two months' written notice. In the event that these arrangements are acceptable to you we shall pleased if you will sign and return to us the enclosed duplicate hereof."
A confirmation clause in the copy exhibited appears to have been executed on behalf of Nationwide.
At or about the time the contract was executed McLean says that he and Metcalf were again approached by Fox who asked whether Nationwide was prepared to take over and operate the ailing business of the "Coach House" restaurant in Laverton. WMC believed, he said, that their employees' interests lay in the continued operation of the restaurant.
Nationwide was under no illusions about the viability of this business but, says McLean, on the strength of Fox's repeated assurances that its long term future at Laverton was secure, the company purchased the business and the premises of the restaurant for $150,000.00.
Fox, in this connection also, denies any representations as to WMC's future conduct. He had, he says, merely suggested that Nationwide might acquire the business for the mutual benefit of both Nationwide and WMC.
The restaurant operation was not a success and Nationwide made an operating loss of $46,000.00. That business, it seems, is now closed.
In May 1987 McLean attended a meeting at Laverton with senior employees of WMC to review the catering contract performance. At that meeting Spotless which had taken over from Nationwide, was asked to tender for the provision of additional catering and cleaning services to a WMC construction camp.
Despite this promising request WMC issued a notice of termination of the existing contract on 1 July.
It took the form of a letter from Bartlett addressed to Nationwide in the following terms:-
"We refer to the contract relating to the above - the executed copies of which were enclosed with your letter of 5 November 1985.
Pursuant to clause 12.1 of such contract we hereby give notice of termination thereof - such termination to be effective on the 28th day of July 1987 at 11.59 pm."
On 10 June 1987 WMC had also sent a letter in relation to the occupancy of the supermarket giving notice of termination thereof from close of business on Friday, 14 August 1987.
According to Bartlett's affidavit there had, leading up to the termination, been dissatisfaction on the part of WMC with the services provided by Nationwide and Spotless and complaints about over charging in the Supermarket.
For the purposes of the claim for interlocutory relief it is unnecessary to have any regard to the rights and wrongs of these alleged deficiencies beyond noting that WMC has made the allegations.
It now emerges that in June 1987 WMC entered into a contract with Poon Bros. to provide catering services in lieu of Spotless.
It also entered a separate agreement with a company called Vulus Pty Ltd for the provision of cleaning services. Both companies it is said, are to commence operations on Wednesday, 29 July 1987.
In the same month WMC agreed with Charlie Carters the operator of a supermarket chain, that it would operate the supermarket business in Laverton as well as a butchers, a grocery and a delicatessen business each currently operated by other persons who were also given notices of termination effective from 14 August.
Charlie Carters have, it is said, agreed to commence operating these businesses from 15 August.
Spotless has had no opportunity to test or respond to the WMC affidavits and has sought no adjournment for that purpose.
That position is understandable given the urgency of the matter. The substantive application and statement of claim were filed on 22 July and McLean's affidavit on 23 July. Argument on the claim for interlocutory relief was heard on Friday 24 July commencing 4.15 pm and I reserved my decision until 4.15 pm on Monday 27 July.
It was in the course of argument that the affidavits by Fox and Bartlett were tendered on behalf of WMC.
I consider however that I can, for the purposes of the claim for interlocutory relief, accept those affidavits on face value insofar as they relate to the arrangements made between WMC, Poon Bros., Vulus Pty Ltd and Charlie Carters.
As to the representations said to have been made by Fox, I accept that there is a serious question of fact to be determined in that regard.
These findings are provisional. In hearing claims for interlocutory relief the court does not finally determine any issue in the case. The views expressed at this stage of the proceedings are expressed only for the purpose of deciding the motion.
The admissibility of evidence at the final hearing is regulated by rules which are not the same as those applicable at the interlocutory stage - Co-Operative Bulk Handling Limited v. Waterside Workers Federation of Australia and Others (1983) 51 ALR 79 at 87.
It is now well established that an applicant for interlocutory relief must satisfy the Court that there is a serious question to be tried and that the balance of convenience favours the grant of the relief sought.
These two conditions of the grant of relief are not independent of each other:-
"...an apparently strong claim may lead a court more readily to grant an injunction when the balance of convenience is fairly even. A more doubtful claim (which nevertheless raises "a serious question to be tried") may attract interlocutory relief if there is a marked balance of convenience in favour of it" - Bullock and Others v. The Federated Furnishing Trades Society of Australasia and Others (1985) 5 FCR 464 at 472.
In this case the issue of the alleged representations by Fox on the materials presently before me, seems critical to the success or failure of Spotless's case.
I accept that there is a serious question to be tried in that regard.
But having regard to the clear terms of the written termination clauses in the catering contract and in the letter from WMC relating to the occupancy of the supermarket, I could not on the evidence so far regard the claim as a strong one insofar as it depends upon the making of those representations.
The balance of convenience seems fairly even.
Spotless will suffer a significant loss if it has to vacate the supermarket premises. It will also no doubt, suffer from the termination of the contract with WMC.
On the other hand arrangements are in place for the provision of the necessary services by other parties who have entered into contracts with WMC for that purpose.
Charlie Carters have agreed to take over the supermarket business and to operate the butchers and grocer stores and a delicatessen in lieu of their present operators.
According to Bartlett's evidence there is a risk that if Poon Bros. and Vulus Pty Ltd is delayed for any appreciable length of time in commencing operations at Laverton, they may be in a position to rescind their contracts.
Further he contends, that if WMC is restrained from terminating its contract with Spotless but is successful at trial, it may not have any replacement for the services presently provided by Spotless.
I cannot say that I find that line of reasoning particularly convincing. It would be surprising if WMC did not have the capacity to organise replacement services at comparatively short notice or on a contingency basis.
It was also his contention, although framed in a rather speculative way, that if Spotless were not to vacate the supermarket the agreement with Charlie Carters might fall through leaving the Laverton community with no direct access to fruit, meat or vegetables.
There are plainly difficulties on either side, although I suspect there is a degree of forensic over emphasis in the way they are put by WMC.
However given the doubts that I have about the strength of Spotless's case and the fairly event balance of convenience, I am of the view that the relief sought ought to be denied.
This is reinforced by the fact that it seeks to keep alive a contractual relationship which has broken down. It does so in such a way that whichever of the alternative forms of injunction sought is granted, the effect would be to require WMC to continue to obtain its catering and cleaning services from Spotless.
While that characterisation may not raise a legal bar to the grant of the injunction, it is a factor to be taken into account in the exercise of my discretion.
I had the benefit of thoughtful and clearly put submissions from counsel on the principles relevant to the grant of injunctions of the kind sought - J.C. Williamson Ltd v. Lukey & Mulholland (1931) 45 CLR 289 at 299-300, Ampol Petroleum Ltd v. Mutton (1952) 53 SR (NSW) 1.
In the circumstances however where there has been limited time for argument and little time for consideration, it is inappropriate to expound upon these principles where the case is clear without resort to them.
In my opinion this claim for interlocutory relief ought to be disposed of on the basis that the applicant's claim, although it raises a serious question, is a doubtful one for the reasons outlined. The balance of convenience is, I think, fairly even.
Having regard to the nature of the relief sought and applying the approach enunciated by the Full Court in Bullock, I will therefore dismiss this claim.
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