Christensen v Gordon - [2021] NZHC 490

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-710

[2021] NZHC 490

BETWEEN
TONY CHRISTENSEN and ROSALIND

MARY CHRISTENSEN as trustees of the CHRISTENSEN FAMILY TRUST TWO
First plaintiffs

AND

WOODY ROBERT PURDOM, LEANNE GILLIAN RUBY CLOUGH and PROFESSIONAL TRUSTEE SERVICES

2019 LIMITED, as trustees of the PURDOM FAMILY TRUST

Second plaintiffs

AND

TIMOTHY PAUL GORDON

First defendant

AND

ALUMINATE SOLUTIONS LIMITED

Second defendant

AND

ANGELA GORDON

Third defendant

Hearing: 30 November 2020 - 2 December 2020

Appearances:

P Amaranathan for the plaintiffs S P Maloney for the defendants

Judgment:

15 March 2021

Reissued:

16 March 2021

JUDGMENT OF PALMER J

This judgment was delivered by me on Tuesday 16 March 2021 at 10.30 am.
Pursuant to Rule 11.5 of the High Court Rules.

Counsel/Solicitors:

…………………………
Registrar/Deputy Registrar

E St John, Barrister, Auckland Mackie & Co Ltd, Auckland Rice Craig, Auckland

CHRISTENSEN v GORDON [2021] NZHC 490 [16 March 2021]

Summary

[1] Mr Tim Gordon and Mrs Angela Gordon sold shares in Trans-Space Industries Ltd (Trans-Space), to Mr Tony and Mrs Rosalind Christensen, and Mr Woody Purdom and Ms Leanne Clough. The agreement contained a restraint of trade clause, preventing the Gordons, in the next three years, from engaging in a business that is “the same or substantially similar to” Trans-Space’s business, “namely the manufacture, . . . distribution … of … partitioning systems or door systems”. Trans- Space distributes complete partitioning systems. Mr Gordon subsequently bought and runs Aluminate Solutions Ltd (ASL), which distributes components of partitioning systems and door systems, particularly aluminium extrusions that make up partition frames.

[2] The purpose of the restraint of trade clause was to prevent Mr Gordon, with his knowledge, expertise, and experience, from competing with Trans-Space in relation to partitioning systems and door systems while its new owners were in their first three years of business. There is no question that was reasonable. I consider that ASL distributes a sufficiently large proportion of a partitioning system and, on balance, a door system, that, for the purpose of the restraint clause, it effectively distributes those systems. ASL competes with Trans-Space commercially. A reasonable person would understand ASL to engage in a “substantially similar” business commercially. Mr Gordon’s operation of ASL means that he is trenching directly on Trans-Space’s business, however genuinely he believes he is not. I issue an injunction accordingly, as clarified in this re-issued version of the judgment. If the parties cannot agree on damages, there will need to be further hearing on that.

What happened?

Trans-Space

[3] In 2012, Mr Gordon, the first defendant, purchased Trans-Space. Trans-Space manufactures, imports, sells, and installs distributed partitioning systems or door systems. These systems are usually installed in office-buildings to partition space into offices – including walls, windows, and doors. They are often purchased at the

recommendation of building contractors, quantity surveyors, and architects who design fit-outs.

[4] Mr Gordon was the managing director and majority shareholder of Trans- Space. He developed relationships with…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Christensen v Gordon

Details

AGLC: Christensen v Gordon [2021] NZHC 490
Case: [2021] NZHC 490
Decision Date: 15 March 2021

CaseChat Overview and Summary

The plaintiffs, Mr and Mrs Christensen and Mr and Ms Purdom, who are the trustees of the Christensen Family Trust Two and the Purdom Family Trust, brought proceedings against the defendants, Mr and Mrs Gordon and Aluminate Solutions Ltd (ASL), in relation to the sale of shares in Trans-Space Industries Ltd (Trans-Space). The defendants had sold the shares to the plaintiffs and, as part of the sale and purchase agreement, the defendants agreed to a restraint of trade clause which prevented them from engaging in any business that was the same or substantially similar to Trans-Space's business, which was the manufacture, importation, distribution, or installation of movable walls, partitioning systems, or door systems in the domestic or commercial markets within New Zealand. The plaintiffs sought an account of profits, compensatory damages, and injunctions restraining the defendants along the lines of the restraint of trade clause. The central issue in the case was whether ASL's business was the same or substantially similar to Trans-Space's business and, therefore, whether the defendants were in breach of the restraint of trade clause. The court held that ASL distributed a sufficiently large proportion of a partitioning system and, on balance, a door system, that, for the purpose of the restraint clause, it effectively distributed those systems. ASL competed with Trans-Space commercially, and a reasonable person would understand ASL to engage in a "substantially similar" business commercially. Mr Gordon's operation of ASL meant that he was trenching directly on Trans-Space's business, however genuinely he believed he was not. The court issued an injunction accordingly. If the parties could not agree on damages, there would need to be a further hearing on that. The court also reserved costs, pending further submissions from the parties.

Orders