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Finewood Upholstery Ltd v Vaughan

Finewood Upholstery Ltd v Vaughan

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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2017-404-633 [2017] NZHC 1679

BETWEEN
FINEWOOD UPHOLSTERY LIMITED

Plaintiff

AND

FLETCHER HEYWOOD VAUGHAN Defendant

Hearing: 23 June 2017

Counsel:

ZG Kennedy and MD Toulmin for plaintiff
DM Salmon for defendant

Judgment:

23 June 2017

Reasons:

20 July 2017

REASONS FOR JUDGMENT OF FITZGERALD J [Granting leave to appeal interlocutory order]

This judgment was delivered by me on 20 July 2017 at 4 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors: MinterEllisonRuddWatts, Auckland
LeeSalmonLong, Auckland

Finewood Upholstery Limited v Vaughan [2017] NZHC 1679 [20 July 2017]

Introduction

[1] The plaintiff (“Finewood”) commenced these proceedings against the defendant (“Mr Vaughan”) in April 2017. Finewood and Mr Vaughan were parties to an agreement concerning the design and manufacture of commercial furniture (“Agreement”). Mr Vaughan purported to terminate the Agreement in February this year. Finewood disputes the validity of that termination, hence these proceedings. Pending resolution of the proceedings, Finewood sought an interlocutory injunction preventing Mr Vaughan from taking any action inconsistent with the terms of the Agreement.

[2] By judgment dated 2 June 2017, I declined to grant the injunction.1 On

14 June 2017, Finewood applied for leave to appeal my judgment to the Court of Appeal. There is no dispute that, in light of s 56(3) of the Senior Courts Act 2016 (“Act”), leave is required.

[3] I heard Finewood’s application for leave to appeal on Friday, 23 June 2017. At the conclusion of that hearing, I delivered judgment granting leave to appeal. These are my reasons for doing so.

Background to judgment and application for leave to appeal

[4] The factual background to the present proceeding is fully set out in my judgment of 2 June 2017. It is not repeated here.

[5] The reasons why I declined Finewood’s application for an interim injunction

may be summarised as follows:

(a) While I found that there was a serious question to be tried on the merits (i.e. whether or not Mr Vaughan’s termination of the Agreement was valid), I did not consider there was any real prospect of Finewood obtaining the relief it sought at trial, namely specific
performance of the Agreement or in the alternative, a permanent

1 Finewood Upholstery Ltd v Vaughan [2017] NZHC 1195.

injunction prohibiting Mr Vaughan from acting outside the Agreement in a manner contrary to its terms.

(b)This was against the backdrop of my finding that the Agreement was sufficiently analogous to a contract for personal services, in respect of which the courts are generally hesitant to grant specific performance, or the permanent prohibitory injunction sought by Finewood.

(c) The approach described at (b) above is particularly so where the evidence demonstrates that the parties no longer enjoy a workable relationship. I was satisfied on the evidence before me that the parties’ relationship has irretrievably broken down.

(d) The losses claimed by Finewood sounded in a remedy in damages.

And while the Agreement contains limitation and exclusion of liability provisions,…

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.

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Details

Case: [2017] NZHC 1679
Decision Date: 23 June 2017

CaseChat Overview and Summary

Finewood Upholstery Limited, a New Zealand-based company, brought proceedings against Fletcher Heywood Vaughan in April 2017. The basis of the claim was an agreement between the parties concerning the design and manufacture of commercial furniture. Mr Vaughan purported to terminate the agreement in February 2017, which Finewood disputes. Finewood sought an interlocutory injunction to prevent Mr Vaughan from acting inconsistently with the agreement while the dispute was resolved. The High Court declined to grant the injunction on 2 June 2017. Finewood applied for leave to appeal this decision on 14 June 2017, and the hearing took place on 23 June 2017. The court granted leave to appeal on the same day, and these are the reasons for doing so.

The legal issues in this case revolve around the grant of an interlocutory injunction in the context of a contract for personal services. The court must consider whether the plaintiff has a serious question to be tried on the merits and whether there is a real prospect of obtaining the relief sought at trial. The court must also weigh the interests of justice and consider the adequacy of damages as an alternative remedy. Furthermore, the relevance of limitation and exclusion of liability provisions to the assessment of the adequacy of damages is an issue that has not been considered by the New Zealand courts.

The court granted leave to appeal because the grounds of appeal raised by Finewood were not frivolous or vexatious. The proper approach to interim and final injunction applications in the case of personal services contracts is reasonably well settled, but there is limited Court of Appeal authority on the question of granting interim and final prohibitory relief in such contracts. The relevance of limitation and exclusion of liability provisions to the question of adequacy of damages has not been considered by the New Zealand courts. The granting (or otherwise) of the interim injunction is of significant importance to Finewood, as it may be unable to recover all of the losses which it says it has or will suffer as a result of Mr Vaughan’s termination of the agreement. Finally, the factors weighing in favour of granting leave to appeal outweighed the inevitable delay of an appeal.

The final orders of the court are that leave to appeal is granted to Finewood, and costs are to be assessed on a costs 2A basis unless the parties are unable to agree, in which case memoranda not exceeding five pages in length may be filed. Finewood’s memorandum is to be filed within 10 working days of these reasons for judgment, with Mr Vaughan’s memorandum to be filed within a further five working days. The court will then determine costs on the papers.

Orders