Greenfields Internet Limited v Rural Networks South Island Limited
[2019] NZHC 45
•30 January 2019
IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE
CIV-2019-412-000004
[2019] NZHC 45
BETWEEN GREENFIELDS INTERNET LIMITED
First Applicant
AND
RURAL NETWORKS LIMITED
Second Applicant
AND
RURAL NETWORKS SOUTH ISLAND LIMITED
First Respondent
AND
CENTRAL LAKES INTERNET COMPANY LIMITED
Second Respondent
Hearing: On the papers Appearances:
J Moss for Applicants
Judgment:
30 January 2019
JUDGMENT OF DUNNINGHAM J
[1] Greenfields Internet Limited (GIL) and Rural Networks Limited (RNL) have applied, without notice, for an interim injunction and associated orders primarily to restrain:
(a)the first respondent, Rural Network South Island Limited (RNSIL) from terminating the internet connection it provides to GIL, and to restrain RNL and the second respondent, Central Lakes Internet Company Limited (CLICL) from directly or indirectly approaching GIL’s customers.
GREENFIELDS INTERNET LIMITED v RURAL NETWORKS LIMITED [2019] NZHC 45 [30 January 2019]
[2] The application is supported by affidavit evidence and by the requisite undertaking as to damages from the applicants to pay any damages sustained by the respondent through the granting of the injunction.
The dispute
[3] GIL is a retail internet service provider servicing rural towns in the North and South Island. RNSIL is a wholesaler of internet connections in Central Otago in the South Island and owns Fixed Wireless Access Infrastructure. RNL is in the same business as RNSIL. It is a related company to GIL and provides the wholesale network infrastructure to GIL in the North Island. It also provided the proprietary design, training and know-how to RNSIL to help RNSIL build its infrastructure in Central Otago.
[4] CLICL is a newly incorporated company, which is a retail ISP provider like GIL. It is a related to RNSIL and was, according to the applicants, originally established to purchase GIL’s customers from GIL.
[5] Since August 2015, RNSIL has provided a wholesale wireless internet connection to GIL which, the applicants explain, was “loosely documented” in a number of documents, including a framework agreement of December 2015.
[6] Two factors appear to have led to the current state of affairs. Disputes arose between the parties over some sums of money owed. GIL now accepts it owes the sum of $16,759 to RNSIL and has placed that sum in a trust account. It also accepts there is another disputed sum of $13,501, which it has offered to place into an independent solicitor’s trust account until determination of that dispute.
[7] There have also been recent negotiations over the potential purchase of the GIL customers which failed in November 2018. CLICL had offered to purchase them for
$600 per customer which was not accepted, with GIL saying it had another offer of
$1,000 per customer. On 30 November 2018, RNSIL then terminated the agreement to provide wholesale network infrastructure, giving 14 days’ notice that the network connection would be disconnected.
[8] The parties had not previously addressed what the termination period should be, in the event that RNSIL’s services would be terminated requiring GIL to transfer its customers from RNSIL’s network.
[9] GIL says that a reasonable period is three months in order to allow time to transfer the customers to an alternate network, although in areas such as Central Otago, it is even more difficult to arrange alternate services from another supplier, meaning it would take more time than normal for GIL to transfer its customers to a new wholesale network provider.
[10] While the parties have negotiated an extension of time, the extension which has been obtained, to 31 January 2019, is insufficient for GIL to do this.
[11] Furthermore, the applicants say that they did not recognise, initially, that RNSIL and CILCL were seeking to “poach” all of GIL’s customers. They now have evidence, via eye witness accounts of RNSIL approaching two separate customers of GIL, one of which cancelled his internet service with GIL the following day, that this is occurring.
[12] GIL seeks a reasonable time to transfer its customers to temporary infrastructure that it is having to build because there are no other alternatives and it seeks, at the very latest, until 31 March 2019. GIL has undertaken to pay RNSIL a month in advance for all customers that are still on RNSIL’s network at the start of each month and is happy to abide by that undertaking in return for an interim injunction preventing disconnection.
[13] There is a second issue arising in that the applicants claim that RNSIL is building new towers in the Central Otago area, using RNL designs, which they say is in breach of the obligation to use that information for the exclusive use of constructing towers to support the GIL network.
Orders sought
[14]The precise interim orders sought are:
(a)Until further order of the Court:
(i)The first respondent, Rural Networks South Island Limited (RNSIL), is restrained from terminating the internet connection it provides to GIL;
(ii)RNSIL and the second respondent, Central Lakes Internet Company Limited (CLICL) are restrained from directly or indirectly approaching GIL’s customers;
(iii)RNSIL and CLICL are restrained from using any of GIL or RNL’s intellectual property whatsoever (including brand), obtained and learned during the business relationship between the parties;
(iv)RNSIL and CLICL are restrained from restricting access to or in any way interfering with the transition of clients from RNSIL infrastructure including as it relates to the CPE to be purchased by GIL from RNSIL;
(b)Ordering RNSIL and CSICL to provide, within 3 working days of receiving these orders, the list of GIL customers that RNSIL and/or CLICL have approached, or have asked a third party to approach (such as Tussock Networks Limited) to transfer their ISP from GIL to CLICL or RNSIL;
(c)Ordering RNSIL and CSICL to provide, within 3 working days of receiving these orders, a list of all clients added to the RNSIL or CLICL brands up to 18 January 2018 (when RNSIL reset the routers) that were connected to the GIL backhaul and internet network;
(d)Ordering the return of all GIL and RNL property within 10 working days; and
(e)Ordering the removal of and ceasing to use any promotional or advertising material of GIL and referring to GIL in any way.
[15] In the circumstances as outlined above, and given the risk of termination tomorrow, I must decide whether to grant all or any of these orders to protect the applicants’ position.
The legal principles applying
[16] The principles to be applied on an application for an interim injunction are well established.1
(a)Is there a serious question to be tried?
(b)Where does the balance of convenience lie?
(c)As a check where does the overall justice lie?
Is there a serious question to be tried?
[17] While the applicant has not yet filed a statement of claim, I accept that there is a serious question to be tried as to:
(a)Whether there has been a reasonable period of notice given before termination of the agreement between the parties; and
(b)Whether RNSIL or CLICL are unlawfully using confidential information of GIL or RNL in approaching GIL customers, and using their designs and proprietary rights.
Where does the balance of convenience lie?
[18] I accept, at least on an interim basis and without hearing from the respondents, that the balance of convenience favours the granting of an interim injunction
1 Clisses Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 140 (CA) and Roseneath Holdings Ltd v Grieve [2004] 2 NZLR 168 (CA) at [35]-[37].
preventing the network from being turned off. If it is turned off then GIL is guaranteed to lose most, if not all of its Central Otago customers. If it is not turned off then RNSIL or CILICL are adequately protected, both because I intend, as a condition of the interim injunction, to require payment in advance for those customers, and because GIL and RNL have provided an undertaking as to damages in the event of losses arising.
[19] I also accept that damages are not a suitable remedy for GIL or RNL. It will be difficult, if not impossible, to quantify the loss per customer because it depends on length of service, type of plan (which can change) and other factors. I also accept that there may be brand reputation issues to GIL, noting that GIL has customers outside the Central Otago region, including in the North Island, where GIL does not use RNSIL’s wholesale network, as RNSIL is only in the South Island.
Interests of justice
[20] No other factor has been brought to my attention which suggests the interests of justice favour a different outcome from that arrived at on the balance of convenience.
Orders made
[21] In my view, taking into account the balance of convenience and the overriding interests of justice, it is appropriate to make some of the orders sought on a without notice basis. Specifically, I make orders that:
(a)Until further order of the Court:
(i)The first respondent, Rural Networks South Island Limited (RNSIL), is restrained from terminating the internet connection it provides to GIL;
(ii)RNSIL and the second respondent, Central Lakes Internet Company Limited (CLICL) are restrained from directly or indirectly approaching GIL’s customers;
(iii)RNSIL and CLICL are restrained from using any of GIL or RNL’s intellectual property whatsoever (including brand), obtained and learned during the business relationship between the parties;
(iv)RNSIL and CLICL are restrained from restricting access to or in any way interfering with the transition of clients from RNSIL infrastructure including as it relates to the CPE to be purchased by GIL from RNSIL.
[22]These orders are made on condition that:
(a)GIL must (in accordance with its undertaking) pay RNSIL a month in advance for all customers that are still on RNSIL’s network at the start of each month;
(b)GIL must pay $13,501 into an independent solicitor’s trust account to be held until final determination of the dispute over payment of that sum;
(c)GIL and RNL must file a statement of claim within five working days of the date of this decision.
[23]The following additional directions are made:
(a)The respondents are to be served with this decision and the orders made as soon as reasonably practicable.
(b)The applicants are to advise the Court when service is effected.
(c)A telephone conference is to be scheduled as soon as practicable thereafter, where the balance of the orders sought will be addressed and any supplementary orders or amended orders to those already made will be considered. A timetable will also be set for filing a notice of
opposition (if any) by the respondents in relation to the interim orders made above.
Solicitors:
Andrew Lewis Law, Auckland J Moss, Christchurch
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