Dux Industries Limited v Leap Australasia Limited HC Wellington CIV 2006-485-2028
[2006] NZHC 1072
•20 September 2006
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV 2006-485-2028
BETWEEN DUX INDUSTRIES LIMITED
Plaintiff
AND
LEAP AUSTRALASIA LIMITED
First Defendant
AND
FERNCO AUSTRALIA PTY LIMITED
Second Defendant
AND
FERNCO INCORPORATED
Third Defendant
Hearing:
18 September 2006
Appearances: Mr Kós and Ms Grew for Plaintiff
Mr Gilbert and Mr Patterson for First Defendant Mr Strauss for Second Defendant
No Appearance for Third Defendant Judgment: 20 September 2006
JUDGMENT OF MALLON J
This judgment was delivered by Justice Mallon on 20 September 2006 at 4.00 p.m. pursuant to r540(4) of the High Court Rules 1985.
Solicitors:
Mr David Quigg, Quigg Partners, Solicitors, PO Box 3035, Wellington (Fax: 04-472 9027) Mr Murray Gilbert, Gilbert Walker Solicitors, PO Box 1595, Auckland (Fax: 09-374 1111) Mr Johann Strauss instructed by Burton & Co, PO Box 8889, Auckland (Fax: 09-300 3775)
DUX INDUSTRIES LIMITED V LEAP AUSTRALASIA LIMITED AND ORS HC WN CIV 2006-485-2028 20 SEPTEMBER 200 20 September 2006
Introduction
[1] Late on the afternoon of Monday 18 September 2006 I heard the plaintiff’s application for an interlocutory injunction against the first defendant on an urgent basis. At the conclusion of the hearing I ordered that the plaintiff’s application against the first defendant was declined. I advised that in view of the lateness in the day I would separately provide in writing the reasons for my decision. This judgment sets out those reasons.
[2] The plaintiff’s application arises out of a distribution arrangement in respect of the third defendant’s products. The products are plumbing ware, and more particularly couplings (used for joining or connecting drainage pipes) sold under the Plumbqwik trade name. The plaintiff says that pursuant to an Agreement dated 30 October 1997 (“the Agreement”) it is the exclusive distributor in New Zealand of Plumbqwik couplings. It says that under this Agreement a notice period of six months was required for either party to terminate the Agreement. It says that this notice has not been given, yet the first defendant has been appointed as the exclusive distributor of the Plumbqwik couplings for New Zealand with effect from 1 September 2006. It further says that the second defendant has failed to deliver to the plaintiff a container of products (“the Container”).
[3] The plaintiff seeks interim relief against the first defendant effectively to restrain it from acting as distributor of the Plumbqwik couplings. It seeks interim relief against the second and third defendants effectively requiring them to continue to comply with the Agreement.
Scope of hearing
[4] The first defendant opposes the application. The second defendant has filed an appearance under protest to jurisdiction. The third defendant has not yet been served.
[5] The first matter dealt with at the hearing on 18 September 2006 was the scope of the hearing that was to take place. The second defendant said that it intended to file an application to dismiss or stay the proceeding. If that application was dismissed it would seek an opportunity to file affidavits in support of its opposition to the interlocutory injunctive relief sought. It said that the plaintiff’s application was not so urgent that it should be denied this opportunity.
[6] The plaintiff accepted that the present urgency was in respect of the Container, which had recently arrived in New Zealand. The second defendant had informed the Court and the plaintiff that the Container was no longer in its possession or control. On that basis the plaintiff did not seek urgent interim relief against the second defendant. Counsel for the second defendant was therefore excused further attendance at the hearing on 18 September 2006.
[7] The plaintiff said it was in a position to proceed on the basis of the relief sought against the first defendant in its interlocutory application. However, the plaintiff anticipated that the first defendant might wish to have the opportunity of further time. The plaintiff said that the hearing could be confined at this stage to deal only with the urgent matter, namely the Container. It sought leave to file an amended form of interim relief which would require the first defendant to deliver the Container to the plaintiff. No amendment was sought in relation to the cause of action pleaded against the first defendant.
[8] The first defendant’s position was that it had come to the hearing ready and was able, to defend the application on all of the terms filed and served. The evidence had been prepared on the basis of the pleadings against it and therefore did not deal with the Container. Counsel for the first defendant advised the Court, however, that the Container was in the possession of the first defendant, that it did not contain all the goods and that goods were committed to customers. On the basis that the amended form of relief in relation to the Container was sought on the pleaded cause of action against the first defendant, the first defendant did not claim prejudice arising from the proposed amendment.
[9]Accordingly, I granted leave to amend the application for interim relief, but
the hearing proceeded on that basis as well as the wider interim relief sought against the first defendant as set out in the plaintiff’s interlocutory application. The interim orders being sought against the first defendant were therefore as follows:
a)Requiring delivery by the first defendant to the plaintiff of the Container;
b)Restraining the defendant from distributing the second and third defendant’s products in New Zealand;
c)Restraining the first defendant from representing to the trade that it is the distributor of the third defendant’s products;
d)Requiring the first defendant to notify persons to whom it has made representations (as to its rights to distribute the third defendant’s products in New Zealand) that it is not the distributor of such products, in a form to be agreed between the plaintiff and the first defendant, or otherwise as directed by the Court; and
e)Requiring the first defendant to record any enquiries received by it as to the third defendant’s products and refer those enquiries to the plaintiff.
[10] The first order was the amended relief. The balance was the relief set out in the application that had been filed and served and these orders were sought subject to further order of the Court.
Background
[11] The Agreement is in the form of a letter between the third defendant and a predecessor of the plaintiff (which was then also called Dux Industries Limited (“Dux”). It includes the following:
… Fernco Inc. agrees to sell Dux Industries Ltd any products listed in Fernco’s catalog #697. The selling price of these products are to be
established by Fernco Inc. any changes in the pricing to Dux Industries Ltd will be preceded by a 30 day notification.
Dux Industries Ltd has the exclusive right to re-sell these Fernco products in New Zealand for the term of this agreement. Dux Industries Ltd will be acting as an exclusive distributor and in no way be empowered to represent or to bind Fernco Inc.
The term of this agreement is for one year from the date of this agreement. The agreement may be renewed or altered therefore by agreement of both parties. Either party shall have the right to terminate this agreement for any reason. Both parties agree to give 6 month [sic] notification prior to termination of this agreement.
…
Fernco agrees that Dux Industries Ltd will be its exclusive distributor in New Zealand … Fernco further agrees to sell its products to Dux Industries Ltd on open account, payment terms net 90 days from face of invoice. Any invoices not paid within 90 days will be considered a breach of this Agreement unless special terms are extended in writing. All payments are to be in U.S. dollars.
… Fernco agrees to honor Dux Industries Ltd orders of products on a timely basis with Quality products and to ship as completely, as quickly and economically as possible.
…
Dux Industries Ltd agrees not to manufacture, distribute or represent any further Fernco type products during the term of this agreement without the approval of Fernco. Fernco agrees not to sell any of its products directly to any other distributor than Dux Industries New Zealand during the term of this agreement, without the approval of Dux Industries Ltd.
Any dispute which might arise at any time hereafter touches on the construction of this agreement or the right and liabilities of the parties hereto shall be referred to the decision of a single arbitrator in the United States of America to be agreed upon between parties, or default of such agreement of
30 days to be referred to the Arbitration Board of the American bar association. The parties agree to be bound by the determination of such arbitrator.
This agreement or understanding, is deeded in accordance with the laws of the United States of America and the construction, validity and performance of this agreement shall be governed in all respects by the United States of America subject, however to compliance of any New Zealand law might [sic] otherwise render any portion of this agreement illegal.
This agreement between the parties may not be assigned to any other entity without written consent of both parties.
[12] At the end of the first year of the Agreement no formal renewal was entered into. Nor was there any formal record of termination. The third defendant continued
to supply its products to Dux which continued exclusively to distribute them in New Zealand.
[13] In or about February 2006, Dux was informed that it would be trading with the second defendant rather than the third defendant. Mr Daintree, the Chief Financial Officer of the plaintiff (who was also employed by the predecessor of the plaintiff), cannot recall exactly how Dux was told initially, but he thinks it was probably by telephone. In any event, on or about 4 February 2006 Dux received an e-mail from the third defendant setting out a new system of shipping and invoicing that was to apply from 1 February 2006. This e-mail included the following:
Dux orders will be placed with Fernco Australia. Orders will be drop shipped from Michigan/England to New Zealand. Billing for the order will be in New Zealand dollars from Fernco Australia and the terms will be 30 days from date of invoice (date of arrival of product). Payment will be made to the Fernco Australia Westpac account in New Zealand dollars.
[14] Mr Daintree said that Dux had not agreed to these changes, but accepted them in practice as there appeared to be no change in substance to the previous arrangements.
[15] In or about April 2006 the assets of Dux were sold to Mallard Industries Limited. Dux changed its name to Christie Group Investments Limited. Mallard Investments Limited changed its name to Dux Industries Limited which is the plaintiff. Effectively this meant that the assets of Dux were sold by the Christie family to the Aliaxis corporate group. Operationally, the business which had been carried out by Dux remained the same. Mr Mitchell, the Managing Director of the plaintiff (and previously of Dux) advised the second and third defendants by telephone of this sale. Mr Mitchell recalls that the president of the third defendant expressed surprised that Dux had changed from a family company to a large corporate. Mr Mitchell could not recall the reaction of the second defendant or the managing director of a United Kingdom-based company in the Fernco group.
[16] A similar exclusive distribution arrangement was in place in Australia between the third defendant and Aquadux Pty Limited (“Aquadux”) which at some point became part of the plaintiff (and Mr Mitchell was also managing director of
Aquadux). As in New Zealand, in or about February 2006 Aquadux began to deal with the second defendant in respect of its orders and payments. Also in that month the second defendant offered Aquadux an agency agreement in substitution of the distribution agreement. Mr Mitchell’s affidavit evidence was that the discussions between Aquadux and the second defendant followed over the next three or four months. An agency agreement was not, however, concluded and the second defendant cancelled the Aquadux distributorship with effect from 1 August 2006.
[17] This was advised by a letter dated 26 May 2006 from the second defendant that included the following:
We note that, we maintain that we have not been formally advised to date that business of Aquadux Pty Ltd and its parent, Dux Industries Ltd, has been disposed of to interests ultimately associated with and owned by Aliaxis S.A/N.V. We understand that what was known as Aquadux Pty Ltd is now known as Christie Group Investments Australia Pty Ltd and that such entity has disposed of its business to Glynwed Pipe Systems Pty Ltd.
Notwithstanding this change of ownership of the business and the change of name of Glynwed Pipe Systems Pty Ltd to Aquadux Pty Ltd, you have represented to us that you are currently employed or otherwise engaged by the latter entity and authorized by it to conduct any negotiations with us in relation to future arrangements that might involve our Company. On the basis that you are so authorised to conduct such discussions with us, we have endeavoured, in good faith, to enter into a fresh arrangement with Aquadux Pty Ltd as to how your Company might acquire and resell our product in the future.
I know that there has been and continues to be a difference of opinion as to whether the original Agreement between our parent corporation and Aquadux Pty Ltd exists but, as I am sure you can understand, from our viewpoint, there is little doubt that the original Agreement was for a period of an initial 12 months duration from its commencement on 30 October 1997 and that after the expiration of the term of that Agreement, we have conducted ourselves in a manner which has been and is consistent with you acting as a mere agent to acquire our product with a view to resale into the Australian markets. As you know, we have and continue to maintain strenuously that we do not recognize any exclusive distributorship currently in place with your Company or any other member of the Dux Group.
For whatever reason, it seems that we can not mutually agree on the above and that our Company’s desire to engage your Company to acquire our product going forward is unsatisfactory from your viewpoint. …
We therefore believe that, we have no other option but to withdraw forthwith from any further discussions with your Company with a view to implementing any possible future relationship in connection with the your Company’s acquisition and resale of our products in Australia. …
…
We trust that you will understand our position in this regard and that you will work with us to ensure a smooth transition such that, after 1 August 2006, Fernco Australia Pty Ltd will be the exclusive distributor of all Fernco, Flex-Seal and Pipe Doctor Products in Australia.
[18] Aquadux developed a substitute product from Taiwan for Australia and on 2 August 2006 (the day after the cancellation of the distributorship took effect) began to distribute that substitute product. That product is sold under the trade name Kwikee Connector. A copy of an eight page price list for the Kwikee Connector range in Australia and bearing the Dux and Aquadux names was included in the evidence before the Court.
[19] By an e-mail dated 5 July 2006 the plaintiff advised the third defendant that it was disappointed with the situation in Australia but that in New Zealand it remained committed and loyal to the third defendant. The e-mail included:
… you have made a business decision for Australia I respect that and I hope you can give us the same respect as we consider our future in Australia … As for New Zealand we are totally committed to Fernco. To show our intentions we would be pleased to commit our loyalty to Fernco in writing. The Dux team are eager to grow the Fernco market in NZ, Dux is a totally separate company to Aquadux, it is a stand-alone organisation that like Aquadux happens to be part of the Aliaxis group. Dux makes its own decisions as to what it sells and how the products go to market. Dux very much want to remain your distributor in New Zealand and sincerely hope that Fernco feel the same …
[20] The response from the third defendant by e-mail dated 18 July 2006 included the following:
…
Your intentions in Australia are looking very clear.
In regards to Dux and Aquadux being separate companies, we do not view it that way. It is all Aliaxis.
…
As a compromise, you had the opportunity to remain our agent in Australia, you decided to sever the entire relationship.
Any actions to become a competitor of Fernco will be taken seriously. Afterall, this is our livelihood, the one and only thing that we do.
Your decision casts a great deal of caution over our relationship. Your ultimate decision in Australia will impact New Zealand.
[21] The plaintiff does not accept that it severed the relationship in Australia but this is not material for present purposes.
[22] In June 2006, Mr Ross Pagett, the Managing Director of the second defendant, was in New Zealand. At that time Mr Daintree was told that if Aquadux competed with the second defendant in Australia then it was unlikely that the third defendant would be comfortable with the plaintiff distributing its product in New Zealand. However, the plaintiff did not receive any notice of termination of the Agreement.
[23] The plaintiff continued to place orders for the product. The ordering process was an iterative one whereby the plaintiff would place an order and would be told whether more products needed to be ordered to fill a Container (so as to minimise shipping costs). On or about 20 June 2006 the plaintiff placed and finalised an order with the second defendant for the goods in the Container. Once the order was finalised the second defendant replied by email stating “no problems – the extra two items will be added – thanks for the order”. The value of the product in the Container was approximately $150,000. The estimated arrival date of the container was 30 August 2006.
[24] The container arrived in New Zealand on 9 September 2006 but was not delivered to the plaintiff. Following enquiry by the plaintiff it received an e-mail dated 28 August 2006 from the second defendant advising the plaintiff that the container was not for it.
[25] On 1 September 2006 the plaintiff advised its customers by written notice that its distributorship had been unilaterally terminated and that the plaintiff would be seeking legal remedies to protect its rights under the Agreement.
[26] On 4 September 2006 one of the plaintiff’s customers provided to the plaintiff a copy of a notice, dated 1 September 2006, which had been sent by the first defendant to that customer and which attached a notice by the second defendant,
both of which stated that the second defendant had appointed the first defendant as the New Zealand distributor of the third defendant’s products.
[27] Meanwhile, because of concerns about the relationship in light of the events in Australia, the plaintiff had taken the precaution of ordering the Kwikee couplings as a back-up from Taiwan. The plaintiff is expecting to receive this product on 25 September 2006 at the earliest, and with a second order arriving in late October. The plaintiff said that between now and 25 September 2006 there are likely to be orders that it is unable to fill.
[28] The plaintiff says that the Kwikee product does not have a standards certification in New Zealand. Evidence was not provided to the Court as to the process or time involved in attaining that certification. However, the first defendant produced evidence that the Kwikee couplings were sold with an Australian certification that the product met the applicable joint Australian and New Zealand standard. The plaintiff’s evidence was that this was pursuant to an interim arrangement although consent was expected to be given once testing was complete.
Position of the first defendant
[29] The first defendant specialises in the supply of plumbing and drainage piping systems. That includes couplings which are sourced from Flex-Seal (UK) (a company purchased by the third defendant in 2002). The Flex-Seal couplings perform a similar function to the Plumbqwik couplings but are more durable as well as being more expensive. The Flex-Seal couplings are said to be especially suitable for commercial and infrastructure applications. The Plumbqwik couplings are said to be more suitable for domestic use. The first defendant’s evidence is that it supplies all plumbing and drainage merchants including those supplied by the plaintiff and has done for many years. (The plaintiff’s understanding was that the first defendant predominantly supplied the “do it yourself” market which includes, for example, Mitre 10 and Bunnings Warehouse, rather than the plumbing merchants which includes, for example, Plumbing World and Master Trade).
[30]The first defendant’s evidence was that it was approached in July 2006 by the
second defendant about selling Plumbqwik couplings. The first defendant was aware that Dux had previously supplied the Plumbqwik couplings. The first defendant said that it inquired as to whether there were any existing contractual commitments that would preclude the first defendant’s appointment. The second defendant assured the first defendant that this was not the case.
[31] The first defendant said that it accepted becoming a distributor for the second defendant with an agreement to commence on 1 September 2006. This was to enable it to prepare itself to market and distribute the Plumbqwik couplings to its customers. It is said that as a result of accepting the appointment as distributor it has hired additional labour, secured additional warehouse storage space, arranged additional funding lines, purchased product and arranged sales. It also says that it has advised all its customers that it is now a licensed distributor of the Plumbqwik product range.
Jurisdiction
[32] No question of jurisdiction arises in respect of the first defendant. Nor is the arbitration clause in the Agreement relevant as the first defendant is not a party to it.
Serious question to be tried
[33] The legal principles for interim injunction applications are well established and were not in dispute between the parties. The first issue is whether there is a serious question to be tried.
[34] The cause of action against the first defendant is that it has unlawfully interfered with the contractual relations between the plaintiff and the second and third defendants (and unlawfully benefited from a breach of agreement by the second and third defendants).
[35] It is a tort to deliberately interfere in the performance of a contract of which one is aware or ought to be aware. To make out this tort the following elements
must be present:
a)there must be a legally enforceable contract in existence;
b)the defendant must have known of the contract and deliberately intended to interfere with it, in order to harm or bring pressure to bear on the plaintiff;
c)the interference may be occasioned either by direct persuasion or interference or indirectly, but if the latter some independently unlawful means must be shown;
d)the interference must have been without lawful justification; and
e)the interference must have occasioned loss to the plaintiff, or if an injunction is sought, there must be clear indication that such loss will occur.1
[36] For the plaintiff it was submitted that the contract in existence was the Agreement. Alternatively the order for the Container was a contract. For the purposes of this interim relief application I am prepared to accept that there is an arguable case that the Agreement was in force. Whether it is in force is a matter that may need to be determined on the basis of United States law. However for present purposes I note there was some conduct consistent with the Agreement having been extended beyond its initial one year term. There was also some conduct consistent with the Agreement having been assigned to the second defendant and to the plaintiff. I am also prepared to accept that there is an arguable case that the order for the Container was a contract.
[37] The next element of the tort is a more difficult one for the plaintiff. There is no evidence before me that the first defendant knew of the contract before it accepted its appointment with the plaintiff and deliberately intended to interfere with it. The plaintiff seeks to meet this element of the tort in two ways. First, it says that the first
1 Todd, The Law of Torts in New Zealand; (4th ed, Brookers Ltd 2005) para 13.2 at p 514.
defendant was on inquiry about the existence of an exclusive arrangement and should have done more than accept the word of the second defendant.
[38] While I accept that recklessly turning a blind eye as to whether one is inducing a breach of contract may amount to knowledge of the contract and intention to interfere with it2, there is no evidence that the first defendant was reckless. The first defendant made an inquiry of the second defendant. The second defendant assured it there was no impediment. The first defendant accepted that assurance from the second defendant. The second defendant was a company in the Fernco group with whom the first defendant had an ongoing relationship over many years. There was no reason for the first defendant to suppose that the second defendant was not telling the truth.
[39] Even if the first defendant was required to inquire further than it did, there is no reason to suppose that the position would have been any different. The view of the second and third defendant (as set out in correspondence referred to above at para
[17] ) was that there was no exclusive distributorship arrangement in place. If the first defendant had asked to see the terms of the arrangement in place with the plaintiff the evidence indicates that the second defendant would have said there is no written agreement in place. If a copy of the Agreement had been provided the evidence indicates that the second defendant would have said that the Agreement expired a long time ago.
[40] In these circumstances I consider that the plaintiff does not establish a serious question to be tried on its first argument as to how the first defendant’s knowledge and intention was said to arise.
[41] The second argument for the plaintiff was that the first defendant had been on notice from no later than 12 September 2006 (when these proceedings were served on the first defendant) of the exact terms of the plaintiff’s contractual right. It was said if the first defendant had not retired from the field in the face of that knowledge it could not continue to assert innocence or non-interference.
2 Todd, The Law of Torts in New Zealand (4th ed, Brookers Ltd, 2005) para 13.2.01 at p 514.
[42] There is some authority that in a continuing interference later knowledge may perfect the cause of action3. I consider, however, that in the present circumstances where the first defendant entered into its agreement with the second defendant lawfully (ie, because the requisite knowledge and intention to interfere was not present), it does not become tortious for the first defendant then to exercise its rights under its agreement. That may be either because there is no deliberate intention to interfere with the plaintiff’s contract in order to harm the plaintiff or because the first defendant has a lawful justification. The fact that the first defendant’s actions interfere with the plaintiff’s contract is incidental to the first defendant’s purpose – which is to exercise its lawful rights under its contract.
[43] Mr Kós submitted that on an application for interim relief where an applicant need only establish a serious question to be tried I should not take this “conservative view” of the tort. Even if that is correct, I consider that on the evidence this argument fails to meet the serious question to be tried threshold. By 12 September 2006 the first defendant knew that the plaintiff asserted that it had exclusive distributor rights under the Agreement. However, it also knew that the second defendant disputed that. It was therefore knowledge only of a claim, not of a contractual right.
[44] The pleading against the first defendant does not plead interference with the contract for the Container. Instead it pleads interference with the Agreement by the first defendant accepting the appointment as distributor. Because of the terms of the pleadings there is no evidence from the first defendant about how it came into possession of the Container. However, it had agreed to become the distributor with effect from 1 September 2006. It was therefore presumably expecting product to arrive on or about that date. By 12 September 2006 the first defendant was aware only that the plaintiff claimed that the Container belonged to it, but by then it considered it had a competing claim and no claim for conversion was alleged against it in relation to the Container.
[45] I therefore consider that the plaintiff has not made out a serious question to be tried against the first defendant. I agree with the first defendant that the case
3 Todd, The Law of Torts in New Zealand; (4th ed, Brookers Ltd 2005) para 13.2.01 at p 514.
against it is not one where it is likely that further critical information will shortly be available that would establish a serious question to be tried. While the plaintiff was undoubtedly placed in a difficult position by not being informed that it would not receive delivery of the Container on the evidence before me (which does not yet include the second and third defendant’s evidence) its complaint is against the second and/or third defendant.
Balance of convenience
[46] Even if there was a serious question to be tried I am not satisfied that the balance of convenience favours the plaintiff. This involves determining the course of least risk of ultimate injustice if the unsuccessful party at this interim stage ultimately succeeds at the substantive trial. Central to this question is whether damages would be an adequate remedy for the plaintiff if interim relief is declined but it ultimately succeeds at trial.
[47] The plaintiff contended that damages would not be an adequate remedy because it would lose the opportunity during the notice period to manage a transition for its customers from the second defendant’s product to its new product. It says that it contracted for a six month notice period but instead it received none. It says that it can be inferred from the two months notice of termination given in Australia that there is a need for/benefit in notice. It says that because it received no notice it will be unable to meet orders until the Kwikee product arrives. The plaintiff says that having disappointed its customers by non-supply it may be difficult to get the customer back. It also says that a period of notice would have enabled it to have its standards certification for the Kwikee product in place in New Zealand.
[48] The plaintiff is concerned that the first defendant will gain an unfair springboard opportunity in respect of its customers in relation to the couplings product as well as the range of other products that the plaintiff sells to its customers. It says that while the lost Plumbqwik sales would be calculable the loss in respect of the other products would not be. It says that if the first defendant establishes relationships with the plaintiff’s customers via the Plumbqwik couplings product this will provide it with an opportunity to provide those customers with its competing
associated products. It says that similar to passing-off cases there may be indirect loss where the competing product is inferior.
[49] I am not satisfied that the plaintiff will suffer harm for which damages will be an inadequate remedy. The plaintiff was always going to need to satisfy its customers that its new product should be purchased. The way the second and/or third defendants ended the distributorship brought forward the time by which it needed to do that. The sales it is unable to make while it is out of stock can be compensated by damages. The lost Plumbqwik sales over a six month period can also be compensated by damages. If the plaintiff’s product will not have certification in New Zealand initially (although it is presently able to label its Kwikee product in Australia as complying with the applicable joint Australian New Zealand standard) and if that translates to lost sales that too will be able to be calculated. The plaintiff has a sales history dating back to 1997 when the Agreement was entered into. It would also obtain on discovery the first defendant’s Plumbqwik sales figures.
[50] The same applies in relation to the associated product sales. Any drop in those sales would be calculable. Mr Kós said that it would be a “back of the envelope” calculation. Nevertheless it is a calculation which can be made on the basis of historic and future sales records. Further, there is no evidence that customers will take only one type of coupling nor associated products from one supplier only. In fact it seems that they do not - the first defendant says that it supplies all the market and already has established relationships with the plaintiff’s customers. There may be a period during which the plaintiff is unable to meet orders and credibility issues to be managed, but the period of non-supply will on the evidence be short. In these circumstances, sales of couplings and associated products will be determined by market forces and not by a “springboard” advantage.
[51] Where damages would be an adequate remedy for the plaintiff there is no need to go further to consider other aspects of the balance of convenience. However in this case there are other reasons which strengthen my view that the balance of convenience does not favour the plaintiff.
[52] First, I accept the submission for the first defendant that it is not appropriate to order the delivery of the goods in the Container to the plaintiff. That may have been an appropriate form of relief if the cause of action against the plaintiff had been in conversion (and if a serious question had been made out on such a cause of action). That was not, however, what was alleged.
[53] Secondly, some of the orders sought against the first defendant are in the nature of mandatory injunctive relief. The plaintiff says it should be entitled to this relief rather than being denied its right to elect to affirm the Agreement. The first defendant says that if the substantive trial cannot take place within six months this interlocutory application will determine the substantive matter. In these circumstances a higher degree of assurance that the relief is rightly granted is required.
[54] Thirdly, if the defendant is restrained from acting as distributor, that would effectively force the second defendant to continue to deal with the plaintiff. That is in circumstances where the plaintiff intends to launch a competing product on the market in six months time in any event. The first defendant referred to Guthrie & Ors v Rio Beverages & Ors (HC, Wellington, CP 170/199, 1 October 1999, Wild J) and Cemix Limited v Flowcete (HC, Auckland, CIV 2006-404-1537, 31 March 2006, Harrison J). In those cases the Court considered it was not appropriate for it to impose orders which required parties to continue to deal with each other under distributor agreements because they require the existence of mutual goodwill to work effectively. The first defendant noted that this would be difficult given the acrimony between the plaintiff and the second defendant and where the second defendant was not present in New Zealand.
[55] Fourthly, the first defendant refers to loss of credibility. It says that it has notified the market that it is the distributor of the Plumbqwik products. If an injunction is granted its customers will need to be notified that by Court order against it, it is prevented from acting as distributor. It says that this would be an indication of wrong doing on its part (at least until the determination of the substantive hearing). It says that this credibility issue is a more difficult one to mange than any credibility issue arising for the plaintiff through being unable to
meet orders for a short period.
Result
[56] Taking into account all of these considerations, I decline to grant the interim relief sought against the first defendant.
Costs
[57]Costs are awarded in favour of the first defendant on a 2B basis.
Timetable
[58] The proceeding will be placed in next week’s Chambers (Monday, 25 September 2006 at 10 am) list for timetable orders. If the parties can agree those orders then a memorandum can be filed and appearances dispensed with.
Mallon J
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