A1 Commercial Services 2012 Limited v Freedom Tours and Taxis Limited

[2018] NZHC 61

IN THE HIGH COURT OF NEW ZEALAND

DUNEDIN REGISTRY

CIV-2018-412-000010

[2018] NZHC 61

BETWEEN

A1 COMMERCIAL SERVICES 2012 LIMITED
Plaintiff

AND

FREEDOM TOURS AND TAXIS LIMITED

Defendant

Hearing:	Determined on the papers
Reasons:	7 February 2018

REASONS FOR DECISION OF GENDALL J

A1 COMMERCIAL SERVICES 2012 LTD v FREEDOM TOURS AND TAXIS LTD [2018] NZHC 61 [7

February 2018]

Introduction

[1]    On Friday last, 2 February 2018, at approximately 6 p.m., as a matter of some urgency, I granted the plaintiff's without notice interlocutory application for both an interim injunction and a freezing order in this proceeding. Orders were made on limited terms, simply to preserve the position of these parties in the meantime.

[2]The specific orders made on 2 February 2018 were as follows:

(a)On the plaintiff’s interlocutory application without notice for the interim injunction:

Pending further order of this Court the plaintiff is granted an interim injunction:

(i)to restrain the defendant from entering into or purporting to enter into possession of the plaintiff’s (now) business known as City United Taxis on the basis of non-payment of the term loan/vendor finance arrangement; and

(ii)to restrain the defendant from using in any way including disclosure and reproduction any confidential information that was sold to the plaintiff belonging now to the plaintiff including but not limited to telephone numbers, call centre details, and bank accounts and accounting files; and

(iii)to restrain the defendant from re-entering or purporting to re- enter the business premises of the plaintiff.

[3]    As to the plaintiff’s application for a freezing order, this order was made as follows:

(a)A freezing order is made to restrain the defendant or the defendant’s solicitor from removing any assets located in New Zealand, or from disposing of, dealing with or diminishing the value of those assets in the meantime.

[4]    No order as to costs was made with respect to the applications. Costs were reserved.

[5]I now give my brief reasons for those decisions.

Background

[6]    In October 2017 the plaintiff as purchaser and the defendant as vendor entered into an agreement for the sale and purchase of a taxi business trading as City United Taxis. Effectively this was a call centre, despatch system and taxi administration business operated from South Dunedin.

[7]    The purchase price for the business was $440,000. Settlement of the purchase took place on about 16 November 2017.

[8]    Some $150,000 of the purchase price was left in following settlement by way of vendor finance. This was secured by first ranking registered General Security Agreement (GSA) over the assets of the plaintiff’s company. This loan was repayable over a period of about two years.

[9]    Standard warranties were included in the agreement for sale and purchase, including a turnover warranty.

[10]   Further, a retention fund of $65,000 was to be held back by the vendor’s solicitor in his trust account from purchase funds for a period of three months following settlement, with a proviso that this fund would be paid back to the plaintiff purchaser if certain events involving taxi owners contracted to the business arose.

[11]   The plaintiff complains that a significant number of the vendor/defendant’s taxi contractors’ signed agreements, which were to be assigned to the plaintiff, were not provided as the contract required and other breaches of the sale agreement occurred on the part of the defendant.

[12]   Further, as I understand the position, the plaintiff has a real concern that the defendant, as the owner and landlord of the premises occupied by the taxi call centre which the plaintiff operates, has threatened to take steps to re-enter into possession of those premises under its GSA immediately on the basis of non-payment of the term loan/vendor finance arrangement. It is said that other threats relating to the plaintiff's business have been made by the defendant. The reasons for urgency in this matter are outlined by the plaintiff in the material before the Court. The plaintiff says that any

undue delay would lead to the plaintiff losing access for its call centre and thereby significant prejudice and irreparable injury.

[13]   The plaintiff contends that all payments it was required to make to date have been met. It complains also however that the defendant had not disclosed a statutory demand it had received from the Inland Revenue Department around September or October 2017 and, further, that the defendant as vendor has outstanding debt owing to the BNZ, which is in default. As I understand the position now, an application to place the defendant into liquidation (which it is said is likely to be unopposed) is before the Court to be heard on 9 February 2018.

[14]   So far as the $65,000 retained by the vendor’s solicitors is concerned, the plaintiff contends that unless the freezing order sought is made, this amount will either be paid to the vendor or to the liquidators of the vendor company and there would be little, if any, chance of the plaintiff recovering these funds in terms of the defendant’s obligations under the sale contract if the order sought is not made.

Decision

[15]   In the present case, the plaintiff has commenced proceedings against the defendant seeking a permanent injunction. Rule 7.53 of the High Court Rules applies and along with r 7.46 permits the present application for an interim injunction to proceed. I am satisfied that, in all the circumstances, and given the extreme urgency I am told is required here and the undue delay that might otherwise arise, this matter can properly be dealt with on a without notice basis, subject to the conditions I will impose.

[16]   The general principles involved here are well settled. The test in American Cyanamid Co v  Ethicon  Limited1  applies  and  as  McGechan  on  Procedure  at  HR 7.53.04 notes, it requires determination:

(a)that there is a serious question to be tried in this proceeding; and

1      American Cyanamid Co v Ethicon Limited [1975] AC 396.

(b)that the balance of convenience lies in favour of granting the injunction sought; and

(c)the overall justice of the position is assessed and supports an injunction being granted.

[17]    The ultimate question is always where that overall justice in the matter lies. This requires the Court to weigh the interests involved against each other. Questions usually arise over the adequacy of damages should relief not be granted, and, obviously, a consideration of whether the status quo should be preserved.

[18]   Considerable urgency was involved in this matter, given that the application was referred to me only by telephone and email communication late on Friday last, 2 February 2017. Issues arose over whether the plaintiff’s call centre business without further consideration would be brought to an end, with the defendant re-entering the business premises as landlord and holder of a GSA, over the weekend.

[19]   As to whether there is a serious question to be tried in this proceeding, the plaintiff contends the defendant has committed serious breaches of the agreement for sale and purchase and that what is sought by way of injunction goes no wider than is reasonably necessary to protect the plaintiff’s interests here.

[20]   Particular complaints are identified by the plaintiff to include the failure of the defendant to notify the plaintiff that it was the subject of an impending liquidation application, its failure to provide all relevant information to the plaintiff (including the provision of contracts for the taxi contractors which set up the relationship between them and the plaintiff, these contracts providing a large portion of the source of income of the business) and the danger of the $65,000 retention being paid to the vendor or to the liquidators of the vendor company prematurely with little chance of any funds being recovered by the plaintiff.

[21]   On its face, I am satisfied to a degree as to the strength of the plaintiff’s case. And, in all the circumstances outlined, the plaintiff’s contention that damages would

be an inadequate remedy here and overall the status quo needs to be preserved, in my view, has merit.

[22]   The overall justice in this case and the balance of convenience, in my view, favour the granting of the injunction and the freezing order sought. Orders are made simply on an interim basis to preserve the position.

[23]   Those orders outlined at para [2] above were made accordingly but on the basis that this matter would come before the Court again on Monday, 5 February 2018 (which occurred), to plan a way forward in resolving the dispute between these parties. In the meantime, counsel for the plaintiff was to make available all the material filed to counsel for the defendant. Interestingly, earlier discussions had taken place regarding the matters the subject of this proceeding between those counsel. Matters were to be discussed further between representatives of the parties and the Court on 5 February 2018.

[24]And, in the meantime, costs were reserved.

...................................................

Gendall J

Solicitors:

Wilkinson Rodgers Lawyers, Dunedin Guest Carter Law Limited, Dunedin

Copy to: G A Paine, Barrister, Dunedin