E-Waste Ltd v Waste Management NZ Ltd HC Auckland Cp439-Sw01

[2001] NZHC 812

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY CP439-SW01

BETWEEN E-WASTE LTD
Plaintiff

AND WASTE MANAGEMENT NZ LTD
First Defendant

AND BUDGET BINS
Second Defendant

AND WASTE CARE LIMITED
Counterclaim Plaintiff

Hearing: 3 September 2001

Counsel: I Williams for Plaintiff
A S Ross/Ms Taylor-Agnew for Defendants

Judgment: 3 September 2001

ORAL JUDGMENT OF MORRIS J

Solicitors: Peter Kemps & Associates, DX EP72013, Auckland/Ian Williams, DX CX10258, Auckland for Plaintiff
Chapman Tripp, DX CP24029, Auckland for Defendant

[1] The plaintiff and the defendants are competitors in the waste disposal industry. The first defendant is a publicly listed New Zealand company. It and its subsidiaries trade throughout New Zealand. It also is involved in Australia. It has operated in this field for many years in one shape or another. It has, as I understand it, a 70 percent share of the market. The plaintiff, on the other hand, is a relatively new player. It was “settled” in March 2000 and has been operating since then. Both parties provide bins to commercial and industrial premises. Serviced by front-loader trucks the waste is taken to a landfill.

[2] There have been ongoing disputes over the practices used by both parties. Specifically the complaints by both target the manner in which each approaches persons already contracted to the other. I have considered the history setting out these disputes and I find it unnecessary to traverse it here, especially as in November 2000 the parties by deed gave reciprocal undertakings as to how they would conduct themselves in trade in the future in relation to each other’s customers. The deed provided:

“1 Each party undertakes to the other that it will not deliberately interfere in the other party’s contractual relations with its customers (the Customers), and in particular will not induce, procure or coerce the breach of any contract between the other party and any of the Customers by:

1.1 offering to pay any damages which may become payable to the other party for breach of contract, or agreeing to pay or provide other compensation which, in the opinion of the Court, has the dominant purpose of compensating for such damages;

1.2 counselling any of the Customers to breach their contracts with the other party;

1.3 assisting Customers with terminating their contracts with the other party (including writing and/or signing and/or sending termination letters for Customers and telephoning the other party on the Customer’s behalf);

1.4 advising the Customers not to contact the other party regarding their intention to terminate or suggesting the Customers only communicate with the other party in writing;

1.5 making false allegations about either of the other party, its shareholders, staff, contractual terms and business ethics;

1.6 offering individual Customers percentage discounts off the other party’s rates (as opposed to offering rates which compete with the other party’s rates or offering percentage discounts, without regard to the identity of the Customer’s current supplier and without knowledge of the existence of any unexpired contract between that Customer and its current supplier via public advertisements in the print or other media or otherwise).”

[3] I have heard a number of submissions as to the effect of this deed and specifically the paragraphs quoted above. I am of the view the deed does no more than record the various rights of the parties and states the obligations which they accepted in respect of the other’s rights. I certainly do not take it to mean in any shape or form any practice then being undertaken by one of the parties was accepted by the other as being valid. Essentially I do not accept the deed in any way abrogated the right of either party to challenge the other’s actions as a tortious act aimed at inducing a breach of contract with a customer.

[4] Despite the deed disputes have continued and each of the parties now seeks an injunction against the other. E-Waste seek an injunction in the following terms:

“1. Pending further of the Court, the defendants, by their officers, employees, servants, agents, contractors or otherwise, be restrained from any of the following or similar steps

1.1 offering to pay any cash to the plaintiff’s customers for the purpose of inducing the plaintiff’s customers to terminate their contract with the plaintiff and enter a new contract in substitution therefore with either of the defendants;

1.2 offering to pay any damages which may become payable to the other party for breach of contract, or agreement to pay or provide other compensation which has the dominant purpose of compensating for such damages;

1.3 counselling any of the customers to breach their contracts with the plaintiff;

1.4 assisting customers with terminating their contracts with the other party including writing and/or signing and/or sending termination letters for customers and telephoning the plaintiff on the customer’s behalf;

1.5 making false allegations about either of the plaintiff, its shareholders, staff, contractual terms and business ethics;

1.6 providing false advice as to the provisions of the plaintiff’s contracts, particularly as to term and right to terminate;

1.7 handling, interfering with, removing or transporting the plaintiff’s bins located on customers sites.”

[5] The defendants, and I include the counterclaim plaintiff, seek an injunction in essentially similar terms as follows:

“1 pending further order of the Court, the plaintiff by its officers, employees, servants, agents, contractors or otherwise, be restrained from any of the following or similar steps:

(i) communicating with any of the applicants’ customers whether orally or in writing with the purpose or intention of persuading, inducing or procuring any of those customers to terminate their contracts with any of the applicants;

(ii) counselling any customers of the applicants to breach their contracts with the applicants;

(iii) assisting any customers to terminate their contracts by any method including drafting letters of termination of contracts or otherwise advising on the termination of contracts;

(iv) offering to pay on any customer’s behalf any liquidated or other damages which may be payable to the applicants as a result of breaches caused by the customer’s early termination of a contract;

(v) offering free servicing or other terms to compensate for any damages that the customer may become liable for to the applicants for the early termination of the contract;

(vi) offering customers a discount by reference to the applicants’ charges as opposed to offering a schedule of the respondent’s own rates;

(vii) misrepresenting to any of the applicants’ customers the contractual terms or conditions applicable to those customers’ contracts with the applicants, and/or e-waste’s contractual terms and conditions;

(viii) criticising the applicants’ corporate culture or reputation as a means of persuading customers to break contracts with the applicants.”

[6] Counsel accept where one person intentionally induces a third person to commit a breach of contract with another, a tortious act has been committed and action lies if damage can be established on the part of the party whose contract has been broken. In the present case each party submits there is evidence before me by way of affidavit from which I should conclude that such a tortious act has been committed by their competitor and having so found I should order an interim injunction in the form sought against the competitor. Each party likewise contends it should not itself be injuncted.

[7] The principles on which an interim injunction are to be granted are well established: Klissers v Harvest Bakeries [1985] 2 NZLR 140. Essentially I have to decide whether the evidence before me establishes:

[a] a serious question to be tried; and

[b] where the balance of convenience lies.

Finally I must have regard to the overall circumstances of the case as revealed by the evidence and decide where overall justice lies. The essential question for me here is whether overall justice in this present case requires I grant one or both or neither of the injunctions sought.

[8] Extensive affidavits have been filed by the parties. Annexed to the affidavits are a number of exhibits referring to correspondence and advice received by the parties by which it is sought to establish inducements for breaches of contract. I am satisfied that clearly up to the time of the signing of the deed either party would stop at nothing to obtain a client from the other. As I indicated to counsel in the hearing I see this case as little more than a continuation after the deed of the pot calling the kettle black.

[9] Most clients of the parties appear to have a three year contract. There is provision for a lesser term and there appears to be in most of the contracts provisions for a rollover renewal. To establish the tort complained of there must be established:

[i] a legally enforceable contract in existence;

[ii] the particular defendant under consideration must have known of the contract and deliberately intended to interfere with it to the detriment of the plaintiff;

[iii] the interference can be occasioned either by direct persuasion or interference or indirectly. I do not in this case consider the indirect position arises; and

[iv] the interference must have been without lawful justification;

[v] there must be evidence of loss actual or potential in the case of an injunction.

[10] In considering the position of the parties and what reasonable inferences I should draw from the material before me I have taken into account the evidence of the parties’ activities prior to the signing of the deed and the reason for such activities. It does, I think, help me to ascertain the intention of the parties in relation to their actions after the deed, bearing in mind each has the sole aim of increasing their particular share of the market and lessening the share of the opposition.

[11] The defendants challenge the actions of the plaintiff E-Waste Limited in offering a free service to customers for up to what can be six months in a three year contract. The length of free service varies but I say any provision for a period of six months’ free service over a three year contract seems to me to be a substantial incentive for a client to sign up with the offeror.

[12] To counter this free service offer the defendants have offered cash payments to customers or possible customers. I am unclear whether these have been calculated on the basis of an equivalent of say six months’ free service but I gather it will be somewhere along those lines so the customer receives a more attractive or equivalent offer. The defendants acknowledge it would be open for me to infer the offer of cash is an inducement and was done to ensure a client would change to them and was offered to counter the free services which it claims in circumstances detailed in evidence was an inducement. The defendants are prepared to acknowledge and give an undertaking to desist from all of the activities in the plaintiff’s motion apart from the action referred to under paragraph 1.1. I have no doubt the offers of cash were inducements and were offered as inducements for a particular client to change his allegiance from the plaintiff to the defendant.

[13] The plaintiff alleges it always has had something in the nature of a free offer. It has always been part of its deal and it was not meant as an inducement. It has been put to me by Mr Williams the plaintiff is entitled, as part of a parcel, to put before any client of the defendants a contract which amongst its terms offers a period of free service. I accept if that is all that is done there may well not be an inducement such as to satisfy or uphold a claim in tort. But once it goes beyond simply showing the terms of the contract proposed, if I may so express it, and this is followed by a reference or discussion concerning the terms of an existing contract, then the actions of the plaintiff fall very close to the line over which it cannot cross. I stress what is not allowed is to deliberately offer an inducement intending to bring about a cancellation of an existing contract. I think it beggars common sense to suggest an offer of six months’ free service out of a 36 month contract is not an inducement. I cannot see any other reason for making such an offer except to induce the offeree to join the plaintiff’s team. However, I stress whether or not in a particular case an inducement has been established must depend upon the particular facts of the particular transaction. I do not think it is possible to make a blanket finding and each deal must be determined on its particular facts. In the present case the material upon which both parties rely are contained in affidavits. On many points these affidavits are in conflict and I simply cannot determine where the truth lies, precisely what has happened and whether it was authorised activities of salesmen.

[14] I am satisfied each party has established there is a serious question to be tried. There is material before me to suggest the defendant is suffering considerable loss as a result of the plaintiff’s actions. It is losing customers and I see no reason to conclude should this practice by the plaintiff be allowed to continue further customers will not be lost. I find it difficult to assess what the real loss will be and if there is loss how it is quantified and indeed at a later stage how it will be substantiated.

[15] So far as the plaintiff’s application is concerned on the balance of convenience issue the matter is equally balanced. So I turn to look at the overall question of where does justice lie. As I have said the defendants have indicated they are prepared to accept the majority of the terms sought but as is so often the case in interim injunction applications essentially the plaintiff’s application comes down to one of money. An interim injunction will rarely be granted unless it is established the person in whose favour the injunction is granted can meet any potential damages. It is invariably the practice to put before the court where such a matter is at issue, the balance sheet of the plaintiff, details of its assets, particulars of its directors and shareholdings and its capital; and overall to give the Court a clear position of its financial viability. In the present case I have had nothing of such nature put before me. I am advised it is a company with a capital of a mere $100. It is described in the intituling as follows:

“e-waste Limited a duly incorporated company having its registered office at 178 Kolmar Road, Papatoetoe, Auckland bringing suit in its capacity as trustee of the e-Waste Trading Trust, carrying on business at 4b/5 Jack Conway Avenue, Manukau City, Auckland, provider of waste disposal services”

[16] I have not overlooked the affidavit by Mr Patterson but its brevity is compelling. I am unable to conclude the undertaking offered has any real substance. In all of the circumstances therefore it seems to me justice requires me to refuse the application for injunction by the plaintiff.

[17] I turn now to the application for the injunction sought by the defendants. There has been an allegation no injunction should be granted because it comes here or they come here without clean hands and they have been tardy in making their complaints. I reject both these submissions to the extent it is suggested they are fatal to the granting of an injunction. On the other hand I think it would be unjust for me in the overall circumstances to grant their injunction, which may have a disastrous effect upon the plaintiff. This is particularly so when I am unable to determine with clarity the real extent of the plaintiff’s actions and whether they were authorised by management. Accordingly I intend to refuse their application also.

[18] Both applications are accordingly refused and costs will lie as they fall. Adjourned to a pre-trial conference four weeks from now, date to be fixed by the Registrar.